Sensex, Nifty decline as weak global cues weigh on markets
MUMBAI: Dragged down by weak global cues over concerns that North Korea may test a hydrogen bomb over the Pacific Ocean, Indian benchmark indices fell around 1.5% on Friday post a volatile trading session on Thursday on hawkish comments by the US Federal Reserve.
The Nifty dipped below the psychological 10,000 mark to close 1.56% down at 9,964.40 points, while the Sensex shaved off 1.38% to end at 31,922.44 points.
Nitasha Shankar, senior vice president and head of research, YES Securities Ltd said, “The markets saw a sell-off of over 1% which in our opinion is on account of weak global cues, which were due to geopolitical tensions surrounding North Korea. The sell-off was more pronounced as foreign institutional investors (FIIS) continued to pull funds out in a reaction to the political tensions and recent revision of China’s sovereign rating. However given the strong fundamentals and growth expectations of India and the Indian markets, we expect markets to bounce back and resume their upward journey.”
According to North Korea said on Friday that it might test a hydrogen bomb over the Pacific Ocean after US President Donald Trump vowed to destroy the country, with leader Kim Jong Un promising to make a “mentally deranged” Trump pay dearly for his threats. Japan, the only country ever to suffer an atomic attack, described the threat as “totally unacceptable”.
However, analysts described the correction in the Indian markets as healthy and long overdue. “The correction was required due to excessive optimism built over the months. The sell-off is triggered by Fed’s comments on unwinding the quantitative easing beginning next month, consequence of which is unknown. Fed action will support the dollar which has already started to recover. As the Indian currency weakens against the dollar, it may have a negative effect on markets,” said Jimeet Modi, chief executive officer, Samco Securities.
The rupee has weakened past the 65 mark to hit a near-six- month low against the US dollar as foreign investors continued to liquidate their holdings in the local equity markets due to domestic headwinds led by slowing growth, wider second quarter current account deficit and signs of a wider fiscal deficit.
Most stocks in banking, capital goods, metals and oil and gas sectors were under pressure. Metal stocks have fallen the most, probably reacting to China’s credit downgrade by S&P Global Ratings.
So far this year FIIS bought $6.40 billion worth of stocks but sold $761.55 million worth of Indian equities in September. Domestic institutional investors have been net buyers this year. They have pumped in Rs8,837.76 crore in September and around Rs51,170.03 crore in 2017 so far.