Sensex falls for 5th straight session on weak global cues
RISING CONCERN Hardening yields, return of LTCG tax weigh on markets MUMBAI:
Indian stocks extended their losses for the fifth straight session on Monday tailing a rout in global equities and as investor sentiment continued to remain subdued post the introduction of long-term capital gains (LTCG) tax in the Union budget.
The benchmark Sensex shed 0.88% or 309.59 points to close at 34,757.16 points. National Stock Exchange’s 50-share Nifty dropped 0.87% or 94.05 points to close at 10,666.55 points.
Equity markets across the globe traded weak on Monday with bond yields rising on concerns that higher US inflation could prompt global central banks to tighten policy more aggressively than earlier expected.
Strong US job data also led to speculation that the US Federal Reserve may boost interest rates next month when its rate setting panel meets on March 21.
In Asia, Japan’s Nikkei index closed 2,55% lower, while London’s FTSE index had shed 1.4% at the time of going to press.
“A combination of hardening yields, weak global equity market, and LTCG tax coming back is weighing on our market,” said Vaibhav Sanghavi, co-chief executive officer, Avendus Capital Public Markets Alternative Strategies LLP.
“I think the market will wait for various domestic and global data points for more clarity. We need to closely watch how domestic flows pan out and how the macro parameters play out. Globally, bond yields and (US) dollar movement are key,” said Sanghavi.
So far this year, foreign institutional investors bought a net $2.22 billion in equities, while domestic institutional investors (DIIs) have invested around ₹400 crore.
“The turbulence in the US bond and equity markets, is key,” said Ajay Bodke, chief executive and chief portfolio manager at brokerage Prabhudas Lilladher Pvt. Ltd.
On Friday, US 10-year bond yields rose to a four-high of 2.84%.
“Domestically, crude oil prices, inflationary trends, government’s management of the fiscal situation, and most importantly, the momentum of revival in corporate earnings will determine the course of the Indian market,” added Bodke.
Crude oil prices have climbed by 31% in the past six months and could worsen India’s current account deficit and fiscal deficit.
Locally, the Reserve Bank of India’s (RBI) interest rate decision on Wednesday will also be closely watched.
Analysts expect the RBI to keep interest rates on hold on expectations that inflation may accelerate further due to higher crude oil prices and proposed hike in minimum support prices for farmers.
Of the 15 economists surveyed by Mint, 14 expect the central bank to keep repo rate—the rate at which the central bank infuses liquidity in the banking system—unchanged at 6%.
Only one expects a rate hike of 25 basis points. One basis point is one-hundredth of a percentage point.
Of the BSE 500 stocks, only 55 have managed to log gains so far in February. The index, as a whole has shed 3.60%.
Around 45 companies shed 10% or more of their value this month, while 208 companies dropped 5% or more this month.
The BSE mid cap and small cap indices were worst hit, as they eroded 4.60% and 5% respectively.
“Many of the retail investors in the market have been firsttime investors in the last two years. This is the first time they are seeing losses and panic has set in,” said independent market analyst Ambareesh Baliga.
While market has been plunging, volatility risk has been on a rise. NSE’s India Vix or volatility index rose 13.8% in last two sessions to 16.0525, indicating choppy times ahead.