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Equity markets plunge on lower guidance, US rate hike fears (Roundup)

IANS  |  Mumbai 

Lower earnings guidance from IT majors, along with heightened chances of a US rate hike and outflow of foreign funds dragged the Indian equity markets to close in the red on Monday.

Besides, broadly negative global markets, caution over the ongoing quarterly results season and lower crude oil prices eroded investors' confidence. However, value buying at lower levels aided the key indices to pare some of their losses in the latter half of the day's trade.

The wider 51-scrip Nifty of the National Stock Exchange (NSE) closed lower by 63 points or 0.73 per cent to 8,520.40 points.

The barometer 30-scrip sensitive index (Sensex) of the BSE, which opened at 27,776.14 points, provisionally closed at 27,529.97 points -- down by 143.63 points or 0.52 per cent from the previous close at 27,673.60 points.

The Sensex touched a high of 27,803.21 points and a low of 27,488.30 points during the intra-day trade.

The BSE market breadth was tilted in favour of the bears -- with 1,536 declines and 1,272 advances.

On October 14, both the key Indian indices had managed to pare some of their losses to close on a flat-to-positive note on the back of positive inflation macro-data points and value buying.

The barometer index had risen slightly by 30.49 points or 0.11 per cent to 27,673.60 points, while the NSE Nifty inched up by 10.05 points or 0.12 per cent to 8,583.40 points.

Initially on Monday, the benchmark indices opened on a higher note on the back of positive export data which was released after market hours on Friday, but soon after that negative global cues triggered heavy selling pressure.

The Asian, domestic and European markets plunged on the back of heightened chances of a US rate hike in December, after US Federal Reserve (US Fed) Chairman Janet Yellen's hawkish comments on the issue.

A rate hike can potentially lead FPIs (Foreign Portfolio Investors) away from emerging markets such as India, and is also expected to dent business margins as access to capital from the US will become expensive.

In addition, sentiments were dampened by a hike in petroleum product prices and a massive outflow of foreign funds.

The downward trajectory was accelerated due to caution over the ongoing second quarter results and the upcoming release of minutes from the first Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI).

On October 4, 2016, the MPC reduced a key lending rate by 25 basis points, bringing in much relief to commercial banks and India Inc.

All six members of the panel, chaired by RBI Governor Urjit Patel, voted in favour of the monetary policy decisions -- the minutes of which will be released on October 18.

Meanwhile, the Indian rupee weakened by 18 paise to 66.89 against a US dollar from its previous close of 66.70-71 to a greenback.

"Broadly negative global markets following US Fed Chairman Yellen's hawkish comments on a possible rate hike in the US dampened investors' sentiments and dragged the equity markets lower," Anand James, Chief Market Strategist at Geojit BNP Paribas Financial Services, told IANS.

"Lower earnings guidance from IT majors and caution ahead of the minutes' release of the first MPC meet also dented sentiments."

According to Dhruv Desai, Director and Chief Operating Officer of Tradebulls: "IT, banking and pharma stocks witnessed selling pressure at higher levels."

"Auto stocks failed to sustain at higher levels and witnessed selling pressure. Oil-gas stocks managed to hold the early gains throughout the session and traded firm."

Desai added that firm USD/INR futures prices pressurised Nifty's price movement in the second half of the trade session.

In terms of investments, provisional data with exchanges showed that the foreign institutional investors (FIIs) sold stocks worth Rs 456.64 crore, whereas the DIIs bought scrip worth Rs 235.57 crore.

Sector-wise, only S&P BSE banking index remained afloat. It augmented by 109.61 points.

In contrast, S&P BSE automobile index receded by 478.50 points, the capital goods index declined by 219.44 points and the healthcare index dropped by 127.30 points.

Major Sensex gainers during Monday's trade were: ICICI Bank, up 6.91 per cent at Rs 258.55; NTPC, up 1.76 per cent at Rs 147.45; Hindustan Unilever, up 0.88 per cent at Rs 849.40; ONGC, up 0.69 per cent at Rs 278.45; and State Bank of India (SBI), up 0.48 per cent at Rs 253.10.

Major Sensex losers were: Mahindra and Mahindra (M&M), down 3.22 per cent at Rs 1,313.40; Hero MotoCorp, down 2.24 per cent at Rs 3,404.15; Asian Paints, down 2.07 per cent at Rs 1,182.90; HDFC Bank, down 1.87 per cent at Rs 1,237.80; and Bajaj Auto, down 1.80 per cent at Rs 2,754.30.



(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)

First Published: Mon, October 17 2016. 19:30 IST