Stocks pare losses from Trump win, note pullout

Stock markets went into a tailspin, with the benchmark indices falling as much as six per cent on government's move to ban high-value banknotes and Donald Trump's surprise victory in the US presidential election. The markets, however, pared most of the losses in one of the sharpest intra-day recoveries.
 
After plunging 1,689 points, or six per cent, benchmark Sensex ended at 27,252.5, down 338.6 points, or 1.23 per cent. The Nifty 50 index closed at 8,432, down 1.3 per cent after dropping 6.3 per cent to 8,002. Both indices ended at their lowest levels in four months and the intra-day low levels were last seen on June 24 following the Brexit vote.
 

Not just the domestic stocks, but global equities and risky assets pared losses after the initial knee-jerk selloff. The paring was on optimism that Trump would take steps to boost economic growth. The sharp recovery forced traders to cover their short positions, which further fuelled the upmove.
 
"Indian markets reacted negatively in the morning. Sentiment eased as investors have reconciled to both facts," said Motilal Oswal, chairman and managing director, Motilal Oswal Financial Services.
 
Experts say outlook for equity markets would continue to remain cautious till clarity on policy direction in the US. Many analysts were seeing Trump's victory as a negative as they saw his protectionist mindset hurting global trade.
 
"The initial over-selling was sentiment-driven," said John Woods, chief investment officer, Asia-Pacific, Credit Suisse. "The election outcome is unfavourable for sentiment and risky asset markets in the very short term. Investors are likely to seek refuge in safe-haven assets. As US president, Donald Trump would be curtailed but prerogative on trade could raise some new growth risks outside the US, notably for emerging markets," he said.
 
Foreign investors sold shares worth Rs 2,100 crore, while domestic investors provided some counter-balance by net buying shares worth Rs 1,116 crore.
 
The demonetisation to curb black (unaccounted) money saw heavy sell-off in real estate, housing finance, automobile, and consumption stocks as investors saw the move as impacting earnings of these companies at least in the immediate term. The BSE realty index slumped 17 per cent before ending 10 per cent lower. Shares of rural-focused automobile companies, including Hero MotoCorp, Mahindra and Mahindra, and Maruti Suzuki lost between 3.4 per cent and 4.7 per cent.
 
"In the near term, the move may hurt economic activity, specifically discretionary consumption, and gold and property demand," said Gautam Chhaochharia, head of India research, UBS Securities, adding that the demonetisation could be a positive for financial companies over the longer term as it would lead to efficiency and lower cost of capital.
 
Meanwhile, technology stocks led by Tata Consultancy Services ended with deep losses on concerns over Trump's policy on outsourcing. Pharma, on the other hand, recouped recent losses.
 
Among  global markets, Stoxx Europe 600, a gauge for European markets, traded around one per cent lower after dropping as much as 2.5 per cent, while Japan's Nikkei 225 was the worst-performing Asian market, ending 5.4 per cent lower.