Markets end flat as geopolitical concerns affect investor sentiment

By: |
June 18, 2020 4:01 AM

Foreign markets were still extending Tuesday’s rally with European markets in the United Kingdom, Germany and France trading 0.6% to 1.12% higher.

The 30-share index Sensex declined 97.3 points, or 0.29%, to close at 33,507.92. The 30-share index Sensex declined 97.3 points, or 0.29%, to close at 33,507.92.

Indian equities bucked the global trend on Wednesday to end the day flat as geopolitical concerns of an escalation between India and China continued to affect investor sentiment. The 30-share index Sensex declined 97.3 points, or 0.29%, to close at 33,507.92. The broader Nifty declined 32.85 points, or 0.33%, to close at 9,881.15.

The markets started their day with a gap down opening with Nifty touching the 9,833.8 mark during the first hour of the trading session. The markets then quickly recovered in line with strong global cues but erased gains towards closing. The benchmarks ended up shedding gains during the last hour of trade. In his speech on Wednesday, Prime Minister Narendra Modi stated India wanted peace but that India would give a befitting reply. Sino-Indian tensions have been the highest in over four decades.

In Wednesday’s trading session the HDFC, HDFC Bank and Kotak Mahindra Bank dragged Nifty down the most. The financial stocks were also impacted by the Supreme Court hearing on a public interest litigation regarding interest waivers on the loan moratorium which was adjourned till the first week of August. Nifty Bank was down by 0.47% during the trading session.

Gaurav Dua, senior vice president, head — capital market strategy and investments, Sharekhan by BNP Paribas, said, “So, on Tuesday, the situation got tense on the border though senior members on both sides met for discussions to diffuse the situation. With the global economic crisis, no country can afford to go to war. We believe that there could be posturing from both sides but a war is unlikely. So the news corresponding to this incident would get absorbed into the markets and from there on the markets would start moving on global cues and fundamentals.”

Foreign portfolio investors (FPI) who have remained buyers so far this month, pulled out $544.9 million in the last two trading sessions. The FPI flows till June 16 are at $2.3 billion in total, they have reduced after the selling from FPIs resumed in the last two sessions. Domestic Institutional Investors have bought stocks worth Rs 237.8 crore till June 16.

Foreign markets were still extending Tuesday’s rally with European markets in the United Kingdom, Germany and France trading 0.6% to 1.12% higher. Dow Jones Mini futures were also up by 171 points at the time of press. This is because the markets were anticipating another round of fiscal stimulus measures from central banks.

Additionally, the markets are keeping an eye on Jerome Powell, the Federal Reserve chairman’s testimony in the House Financial Services Committee on Wednesday. The Dow Jones is set to have a positive start extending its yesterday’s gains in anticipation of fiscal stimulus measures and positive breakthrough in a trial for the Covid-19 drug treatment.

Deepak Jasani, head of retail research, HDFC Securities, said, “European shares rose on Wednesday, as expectations of more US stimulus and hopes that the global economy can bounce back from an awful April offset fears of further lockdowns due to a new outbreak in China. The UK Consumer Price Index sank to just 0.5% in May from 0.8% the previous month — falling even further below the Bank of England’s official 2% target.” Asian markets were however trading flat to higher with bourses in China, South Korea and Taiwan, ending their day flat. Hong Kong’s Hang Seng index was up by 0.56%.

The biggest gainers on Nifty were Maruti Suzuki, Bharti Airtel, Wipro, Britannia Industries and Axis Bank, up by 4.05%, 3.41%, 2.45%, 1.98% and 1.85%. The top losers were Bharti Infratel, Kotak Mahindra Bank, ITC, Power Grid Corporation, as well as Mahindra and Mahindra, down by 4.49%, 2.29%, 2.19%, 2.15%, and 1.92%. Nifty Midcap and Nifty Smallcap were up by 0.1% and 0.5%. Sectorally, the top losers were Nifty Financial Service, Nifty Metal, Nifty Bank and Nifty PSU Bank. The futures and option segment saw volumes worth Rs 16.68 lakh crore against the six month average of Rs 13.9 lakh crore.

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