SENSEX PLUNGES 504 POINTS AMID PROFIT BOOKING

MARKET PLUNGE SBI stock fell over 7% on Wednesday, the biggest single-day decline in four years

The benchmark indices dropped 1.3 per cent on Monday, mirroring weakness in the global markets, after investors booked profits judging recent gains as excessive. Most global indices also traded weak as investors assessed the potential fallout of an impeachment inquiry of US President Donald Trump. The Sensex ended 504 points, or 1.3 per cent, lower at 38,594, while the Nifty declined 148 points, or 1.3 per cent, to close at 11,440.

The benchmark indices dropped 1.3 per cent on Wednesday — mirroring the weakness in global markets — after investors booked profits judging recent gains as excessive. Most global indices traded weak as investors assessed the potential fallout of an impeachment inquiry of US President Donald Trump. US House Speaker Nancy Pelosi said a formal impeachment inquiry would be opened on Trump.

The benchmark Sensex ended 504 points or 1.3 per cent lower at 38,594, while the Nifty declined 148 points or 1.3 per cent to close at 11,440. In the previous three sessions, the two indices had surged above 8 per cent, buoyed by the reduction in corporation tax rates. Market players said some investors were taking money off the table as the tax cut would boost earnings, but a revival in the economy would take place with a lag.

Most global equities fell by over a per cent, as the political uncertainty in Washington D.C. added a fresh complication for investors grappling with rising tensions between the US and China, and in West Asia.

“Political uncertainty in the US amid impeachment talks pulled indices lower. There was heightened selling witnessed in state-owned banks,” said S Ranganathan, head of research at LKP Securities.

The Nifty PSU Bank fell by over 5.6 per cent as the crisis at PMC Bank hurt investor sentiment and raised fresh fears of spiraling of bad assets on account of the pain in the real estate sector. The SBI stock fell 7.7 per cent — the most among Sensex companies — reversing all gains made since the tax cut. Bank of Baroda and Bank of India shares fell 6 per cent each.

Both domestic as well as overseas investors were net sellers on Wednesday, taking out ~342 crore and ~763 crore, respectively. In the previous two sessions, institutional investors had been strong buyers after market sentiment changed from bearish to bullish following the Centre’s move to lower taxes.

Last week, the Sensex and Nifty had dropped to their lowest levels since February. However, with the stellar gains made in three sessions prior to Wednesday’s, the Sensex had come just 3 per cent away from a new alltime high.

“We prefer to remain cautious at higher levels. The indices are trading near peak valuations and sustainability at this level is essential,” said Ajit Mishra, vice-president (research), Religare Broking. In a recent note, Edelweiss had said further gains in the market could be modest as the positive impact on the economy could only happen with a lag.

“The economic response in terms of investment and consumption will be a tad lagged even as expectations run upfront,” the note said. Asian indices fell on Wednesday, after US Democrats launched formal impeachment proceedings against US President Donald Trump, and on account of renewed trade fears as he adopted a hard line on China. House Democratic leader Nancy Pelosi announced a formal impeachment inquiry after the close of US markets. Democrats accuse Trump of abuse of power in a reported attempt to pressure the new president of Ukraine to open a corruption investigation into Joe Biden — his lead challenger for the White House— and his son Hunter.

Tokyo’s Nikkei closed down 0.4 per cent, the Shanghai Composite Index slipped 1 per cent, and Hong Kong’s Hang Seng ended 1.3 per cent lower. Seoul’s Kospi, too, fell 1.3 per cent and Taiwan’s TAIEX gave up 0.4 per cent, while Singapore lost 1.18 per cent.