CHINA, FED WORRIES PULL MARKETS DOWN

Sensex posts sharpest drop in 3 mnths; BSE m-cap falls ~5 trn in 2 sessions

The Indian markets started the week on a shaky note amid weakness in global markets as Chinese realty giant Evergrande's debt woes, falling commodity prices, and concerns over the US Federal Reserve’s policy meeting worried investors.

The benchmark Sensex ended the session at 58,491, down 525 points, or 0.9 per cent — the sharpest fall since July 19. The Nifty50 declined 188 points or 1.07 per cent to end the session at 17,397. Over the past two trading sessions, the BSE’S market cap has seen an erosion of over ~5 trillion. On Monday, it was ~255.5 trillion.

Gains in consumer goods stocks cushioned the Indian markets, helping them outperform their global peers.

The markets in Europe fell over 2 per cent intraday; the American markets, too, opened extremely weak. Hong Kong’s Hang Seng declined 3.3 per cent amid a sell-off in property stocks as investors were worried about the debt crisis in Evergrande, which has liabilities of over $305 billion.

Interest payments on two bonds of the Evergrande group will come on Thursday. It will be a critical test of whether the company will meet its obligations. Evergrande has fallen behind on payments to banks and suppliers.

Meanwhile, the decline in iron ore prices to below $100 amid China’s efforts to rein in output led to a sell-off in metal and mining stocks.

Investors are also worried ahead of the Federal Reserve’s policy statement in which its officials are expected to start laying the groundwork for tapering the stimulus. “While the markets are keenly awaiting clarity on the Fed’s taper plans in terms of timelines and quantum, we believe it may give advance notice on tapering in this week’s meeting, followed by a formal announcement in November. The pace of tapering is expected to be gradual, and the Fed is expected to remain accommodating in its monetary policy stance. Regarding the Chinese property major, it may be a bit too early to conclude on any possible contagion effect on global markets,” said Milind Muchhala, executive director, Julius Baer.

The broader markets saw a sharper cut on Monday, with the BSE Midcap and Smallcap indices falling close to 2 per cent each. The market breadth was negative, with 2,332 stocks declining against 1,041 advancing stocks.