Markets plunge following Chi crash, Sensex down 538 points

Mumbai, Jan 4: The Chinese markets crash coupled with tensions in the middle east, disappointing macro-economic data and profit-booking, on Monday plunged Indian equity markets to their steepest fall in the last four months. A barometer index of the Indian equity markets closed the day’s trade deep in the red receding by 538 points or 2.05 percent.

The previous steepest plunge took place on September 4, last year, when both the bellwether indices of the Indian equity markets dived over 2.15 percent each.

Initially, both the bellwether indices opened on a flat note, but soon plunged deep in the red, following their Asian peers. Asian bellwethers declined on the back of the Chinese markets’ crash which was triggered by a lower-than-expected purchasing magers’ index (PMI) data. The Caixin PMI figures showed contraction in industrial activity in Chi for the 10th successive month.

The PMI data battered the Shanghai index which halted trade for the remainder of the day after crashing by seven percent — leading to the circuit breaker coming into play on the very first day of its operations.

The cascading impact of the falling Chinese markets impacted other regiol exchanges, including the Japanese indices which declined by three percent. In addition, weak domestic PMI data further dented sentiments. This, coupled with recent consolidation at the bellwethers, prompted some investors to book profits.

The seasolly adjusted Nikkei India Manufacturing PMI hit its 28-month low and stood at 49.1 in December from 50.3 in November 2015. Besides, investors were seen cautious regarding the upcoming IIP (Index of Industrial Production), CPI (Consumer Price Index), WPI (Wholesale Price Index) data points and third-quarter earnings season which starts from January 14. During the day’s trade the Indian VIX (volatility index) moved up to 18 percent and neared its upper band of 20 percent.

The barometer 30-scrip sensitive index (Sensex) of the Bombay Stock Exchange (BSE) sank by 538 points, or 2.05 percent. Similarly, the wider 50-scrip Nifty of the tiol Stock Exchange (NSE) closed the day’s trade deep in the red. It dived by 172 points, or 2.16 percent, at 7,791.30 points.

The Sensex of the S&P BSE, which opened at 26,116.52 points, closed at 25,623.35 points — down 537.55 points or 2.05 percent from its previous day’s close at 26,160.90 points. The Sensex touched a high of 26,116.52 points and a low of 25,596.57 points in intra-day trade.

The Sensex closed the previous session on January 1, up a paltry 43.36 points, or 0.17 percent, while the Nifty inched up by 17 points, or 0.21 percent.

The S&P BSE market breadth favoured the bears — with 1,608 declines and 1,277 advances.

“The correction in the Indian markets was sparked by the Chiness crash of around seven percent. There was a broad-based selling,” And James, co-head, technical research desk with Geojit BNP Paribas Fincial Services, told IANS.

“Nifty’s climb towards the 8,000-mark prompted some investors to book profits. In the background, a less-than-expected India PMI data coupled with sector specific developments in the telecom sector dented sentiments.” Other factors such as — escalation of tensions between Saudi Arabia and Iran which could lead to instability in the middle east was cited by market observers as one of the main reasons for the sharp correction across markets.

“We expect our markets to continue to react to global cues in the absence of any major trigger this week. We expect earnings and IIP/CPI data to be the next important triggers on the domestic front,” predicted Vaibhav Agarwal, vice president and research head at Angel Broking. Nitasha Shankar, vice president for research with YES Securities elaborated that volumes picked up in the correction suggesting a pause in the uptrend. “Indian VIX moved up 18 percent approaching the upper end of the range portending to choppy trading sessions going ahead,” Shankar noted. “Broader markets also declined in line with the headline indices. All sectorial indices ended in the red with PSU banks falling a massive 3.5 percent.”

Sector-wise, heavy selling was witnessed in banking, automobile, healthcare, capital goods and information technology (IT) stocks. The S&P BSE banking index plunged by 504.49 points, automobile index plummet by 395.92 points, healthcare receded by 303.72 points, capital goods index declined by 298.05 points and IT index fell by 151.15 points.

Both, the foreign and domestic institutiol investors were net sellers during the day’s trade. According to data with stock exchanges, FIIs divested Rs.667.15 crore, while DIIs sold stocks worth Rs.222.79 crore. Apart from equities, the rupee was battered in the day’s trade. It weakened by 48 paise to closed at 66.62 to a US dollar from its previous close of 66.14 to a greenback. Major Sensex gainers during Monday’s trade were Wipro, up 0.28 percent at Rs.557.95; Hindustan Unilever, up 0.07 percent at Rs.857.15; and Asian Paints, up 0.06 percent at Rs.880.65. The major Sensex losers were Tata Motors, down 6.10 percent at Rs.377.15; Bharti Airtel, down 4.10 percent at Rs.326.60; Adani Ports, down 3.66 percent at Rs.257.70; BHEL, down 3.45 percent at Rs.165.10; and HDFC, down 3.26 percent at Rs.1,216.35. (IANS)