Markets post sharpest daily decline in two months on dismal fiscal deficit data
MUMBAI: Benchmark equity indices fell 1.3% on Thursday, the sharpest daily decline in two months, mirroring losses in Asian equities triggered by a steep fall in US technology stocks.
Dismal fiscal deficit data and caution ahead of the release of September quarter economic data, which came after market hours, kept investors on the sidelines. The market was also choppy on the expiry of domestic derivative contracts.
BSE’S 30-share Sensex closed 1.35%, or 453.41 points, lower at 33,149.35 points, and the National Stock Exchange’s 50-share Nifty shed 1.3%, or 134.75 points, to close at 10,226.55 points. It was the lowest close for these indices since 16 November. It was the biggest daily decline for the Sensex and Nifty since 27 September.
Fiscal deficit at the end of October hit 96.1% of the budget estimate for 2017-18. The fiscal deficit—the difference between the government’s expenditure and revenue—was ₹5.25 lakh crore in April-october.
“A healthy fiscal deficit gives the Centre more head room to use 33,600 33,500 33,400 33,300 33,200 33,100 99.15am15am Sensex 33.30pm 30pm macroeconomic tools like interest rates to boost the economy, which is why the current figures have unnerved investors,” said Karthikraj Lakshmanan, senior fund manager, equities, BNP Paribas Mutual Fund.
Only two of 30 Sensex stocks closed higher. RIL lost 2.42%, making it the biggest contributor to the index’s decline.
Investors were also wary because they were waiting for the outcome of the Organisation of Petroleum Exporting Countries (Opec) meeting in Vienna, where oil producers are expected to extend a supply cut, which have propped up oil prices this year.
Before Thursday’s fall, capitalisation of the Indian stock market had reached $2.29 trillion, overtaking Canada’s $2.27 trillion.
“Largely, derivatives expiry and caution ahead of GDP data, and that along with dismal fiscal deficit data, added to the woes of the market. Weak Asian markets had deterred sentiment,” said Rikesh Parikh, vice-president, institution corporate broking, Motilal Oswal Securities Ltd. “Gujarat election results and US Federal Reserve’s meeting are key events to watch out for.”
On Friday, the markets may take consolation from the fact that Indian economic growth rebounded to 6.3% in the September quarter, an indication that the economy has shaken off the lingering effects of the note ban last year and the GST rollout on July 1. Growth had slowed to 5.7% in the June quarter, the slowest pace in three years.
Foreign institutional investors (FIIS) returned to investing in Indian equities in November and have pumped in a net of $8.86 billion so far in 2017. Domestic institutional investors have injected a net ₹80,979,64 crore in Indian shares so far this year.