North Korea Mis­sile Lands on Dalal Street, Mkt Bleeds

In­dian bench­marks slip nearly 1% to close at their low­est lev­els in a month

The Economic Times - - Front Page - Our Bureau Realty, Auto & Pharma Worst Hit

Mumbai: Mid­cap and small­cap stocks fell the most in nine months on Thurs­day as mar­gin calls were trig­gered in some stocks and mar­ket sen­ti­ment soured amid es­ca­lat­ing geopo­lit­i­cal tensions be­tween the US and North Korea. Track­ing the fall in Asian mar­kets, the In­dian bench­marks fell nearly 1% to close at their low­est lev­els in a month, with Nifty clos­ing be­low 9,900.

Sen­sex tum­bled 266.51 points, or 0.8%, to end at 31,531.33 and Nifty lost 87.80 points, or 0.9%, at 9,820.25. Both in­dices have fallen for four con­sec­u­tive days. The BSE Small­cap in­dex cracked 3.6% to 15,071.08 and BSE Mid­cap in­dex slumped 2.6% to 14,755.85. The volatil­ity in­dex rose above 14 level for first time since March be­fore end­ing up 2.6% at 13.80.

Real es­tate, auto and phar­ma­ceu­ti­cal sec­tors dragged the most. Tata Mo­tors was the worst per­former on the bench­marks with the or­di­nary as well as the DVR shares los­ing 8% each.

The US-North Korea ten­sion, which ratch­eted up again on Thurs­day with Py­ongyang an­nounc­ing that a plan to strike US Pa­cific ter­ri­tory of Guam will be ready in days, is prompt­ing in­vestors to dump stocks and move to­wards safe haven as­sets such as gold.

“The geopo­lit­i­cal tensions be­tween North Korea and US have come at a time when ex­pec­ta­tions were rid­ing high in the mar­ket, which is not a good sign. Sev­eral mid­caps are over­val­ued by 10-15% and some large caps are over­val­ued to the ex­tent of 10%,” said San­jeev Prasad, co-head at Ko­tak In­sti­tu­tional Equities.

Bro­kers said the mar­gin calls in some mid­caps, par­tic­u­larly real es­tate com­pa­nies, were trig­gered partly also due to the fall­out of the Se­cu­ri­ties and Ex­change Board of In­dia’s or­der late on Mon­day in which it im­posed curbs on 331 sus­pected shell com­pa­nies.

In­dian mar­kets had been rid­ing high with gains of over 20% this year but geopo­lit­i­cal tensions and the Sebi di­rec­tive have pulled them down from record high lev­els.

Other lag­gards on the Nifty in­clude Dr Reddy’s Lab­o­ra­to­ries which fell 5% to .₹ 1,945.10, Bank of Bar­oda which slipped 4% to .₹ 149 and GAIL In­dia which fell 3.7% to .₹ 368.15. Front­line in­for­ma­tion tech­nol­ogy stocks bucked the trend and were among the top Nifty gain­ers, end­ing up 0.3-2.9%.

TEM­PO­RARY BOUNCE­BACK SEEN

The Sen­sex is now 3.5% away from the life­time high of 32,686.48 hit on Au­gust 2 while Nifty is 3.1% away from record high of 10,137.85 hit on the same day.

The fall has been more se­vere in mid­caps with the BSE Mid­cap in­dex fall­ing 5.7% af­ter hit­ting a record high of 15,642.07 on Tues­day. The BSE Small­cap in­dex has fallen 6.9% from its record high of 16,186.13 on July 26. An­a­lysts see a tem­po­rary bounce­back in the mar­ket as the Se­cu­ri­ties Ap­pel­late Tri­bunal has stayed Sebi's or­der on shell com­pa­nies in the case of Prakash In­dus­tries and J Ku­mar In­frapro­jects. “The panic (in mid­caps) will sub­side but it (SAT or­der) will not lead to any ma­jor buy­ing,” said Rikesh Parikh, VP­mar­kets strat­egy and equities at Moti­lal Oswal Fi­nan­cial Ser­vices.

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