North Korea Missile Lands on Dalal Street, Mkt Bleeds
Indian benchmarks slip nearly 1% to close at their lowest levels in a month
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.