The benchmark indices plunged more than 1% on Tuesday on the back of widening trade deficit, weakening Rupee and contraction in Chinese manufacturing activity.
At 1.00 pm IST, the BSE benchmark Sensex was trading 1.6% lower at 26,869 points, while NSE’s Nifty was trading 1.5% lower at 8,093.45 points. The markets were under pressure with Chinese manufacturing activity showing contraction. The HSBC/Markit China manufacturing purchasing manager’s index’s initial reading fell to 49.5 in December from November’s final reading of 50.
The Rupee plunging to a 13-month low of 63.53 against the dollar and November’s trade deficit widening to an 18-month high of $16.86 billion added further pressure on the markets.
Most of the Asian markets were trading in the red. The Nikkei (-2%), Hang Seng (-1.2%), Kospi (-0.8%), Straits Times (-2%), Jakarta Composite (-1.8%), Taiwan Taiex (-0.4%) and Straits Times (-2%) were trading lower. Meanwhile, the Shanghai Composite was trading higher by 1.2% amid hopes of a stimulus package by People’s Bank of China (PBOC).
However, analysts remain bullish on markets. “We expect growth to recover from 5.4% estimated in FY15 to 6.5% in FY16 and further to 7%-plus in the medium term supported by step-up in investments, faster implementation of reforms and addressing of supply-side issues,” Macquaire said in a recent report.
“The market has strong support in the short to medium term from liquidity, policy reforms and improving fundamentals,” it added.
The markets will be watching the Federal Open Market Committee’s 2-day meeting starting today for further triggers.