Moody’s effect! Stock, bonds, rupee weak as sentiment worsens

By: |
Updated: November 9, 2019 9:04:24 AM

Some economists chose to downplay the downgrade pointing out that concerns about slowing growth and a widening fiscal deficit were overdone.

Moodys effect, Stock, bonds, Sensex, GDP growth forecasts, Bank Nifty, IT firmsIn the stock markets, the Bank Nifty rallied smartly throughout the day but gave up almost 300 points with much of the fall coming in late afternoon trade

Stocks, bonds and the rupee all showed signs of weakness on Friday after Moody’s lowered India’s outlook to negative from stable. The rupee tumbled 32 paise on Friday driven down by a strengthening dollar as also poor sentiment and closed the session at a three-week low of 71.285. Bond yields edged up with the old benchmark yield closing at a six-week high of 6.75% while the Sensex fell 330 points.

Some economists chose to downplay the downgrade pointing out that concerns about slowing growth and a widening fiscal deficit were overdone. Others, however, lowered their GDP growth forecasts sharply. While November has seen strong portfolio flows into the bond and equities markets — $652 million and $627 million, respectively, currency market dealers were cautious unsure of how flows would behave.

The yield on the new benchmark also closed 5 basis points higher at 6.56%, hitting the highest level since its October 2019 launch. Besides the downgrade, the bond market is also concerned about higher supply of government paper, given chances of fiscal deficit widening. Despite, sufficient liquidity and multiple repo rate cuts, bond yields have not budged.

WATCH VIDEO | Moody’s downgrade on demonetisation anniversary: What went wrong? Explained

In the stock markets, the Bank Nifty rallied smartly throughout the day but gave up almost 300 points with much of the fall coming in late afternoon trade; dealers attributed the drop partly to profit- booking following the recent rally and partly due to Moody’s downgrade of several banks.

Apprehensions that the economy would remain in a slowdown for a prolonged period necessitating cuts in earnings estimates also led to a sell-off in stocks, dealers said. The weaker currency, however, will help exporters including IT firms and pharma companies. The Sensex ended at 40,323.61 while the broader Nifty gave up 103.90 points to close at 11,908.15.

Get live Stock Prices from BSE and NSE and latest NAV, portfolio of Mutual Funds, calculate your tax by Income Tax Calculator, know market’s Top Gainers, Top Losers & Best Equity Funds. Like us on Facebook and follow us on Twitter.

Next Stories
1RBI official says multiple regulators hurting bond market development
2Sensex tanks 330 pts, Nifty below 12K as Moody’s cuts India credit outlook
3Alibaba sets eyes on $15 billion Hong Kong listing, says report