The domestic stock markets witnessed a very choppy session on Thursday, with the 30-share Sensex plunging 572 points and the broader Nifty 50 ending near 10,600 on the back of a negative cues and a vicious selloff in global equities. Benchmark equity indices cracked for the third consecutive session today, as the Sensex plunged 572.28 points, or 1.59 per cent, to close at 35,312.13. Similarly, the broader NSE Nifty fell 181.75 points, or 1.69 per cent, to 10,601.15. Sectorally too, all indices on the BSE and NSE ended in the red, led by metal, oil and gas, pharma and financial stocks. We take a look at three key reasons behind today’s carnage.
US China trade tensions
Global headwinds spooked Dalal Street on Thursday, after global stocks fell on the back of fresh flare-up of tensions between China and the US. Notably, global stocks plunged on Thursday after the arrest in Canada of a top executive at Huawei, one among China’s national technology champions. Investors turned jittery as it fanned concern over the ability of US and China to make their trade truce permanent. Germany’s Dax slipped 2.5% and the FTSE 100, S&P 500 futures extended their decline to 1.9%.
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The domestic currency is back at 71 levels dragged by the strength of the US dollar against other overseas currencies and foreign fund outflows. The Indian rupee may weaken to 75 per US dollar by FY19 end as credit tightening and dollar strength is weighing on the domestic currency, Fitch Ratings said. In addition, India’s FY19 GDP forecast has been cut to 7.2 percent from 7.8 percent on weak liquidity and high financing costs by the global rating agency.
The elections in 5 Indian states also added to caution in the street, even as investors wait eagerly. The outcomes of the state elections will be crucial for the market as they will likely set the tone for the general elections next year. Voting in Rajasthan and Telangana will be held on December 7 and the counting of votes in all the states will be done on December 11. “The market expects the BJP to retain Chhattisgarh and Madhya Pradesh but lose Rajasthan,” Kotak Institutional Equities said in a note.
OPEC Meet outcome
Crude oil prices remained volatile ahead of the OPEC meet outcome later today. “Our view is that oil prices will stay volatile irrespective of the outcome today and they will stay range bound between $50 and $70. They are not going to either way irrespective of production cuts. We do not expect production cuts to be severe, plus the influence that OPEC has over prices is also very limited,” Vikas Halan, Senior Vice President, Corporate Finance Group, Moody’s told ET Now.