The key equity indices Sensex and Nifty extended last week’s losses and plummeted drastically on Monday. The benchmark Sensex lost as much as 448 points to hit a day’s low of 31,474.56 points to a one-month low and broader Nifty 50 shed 148 points to hit the day’s low of 9,816.05 points. The geopolitical tensions in North Korea and continuous FII (foreign institutional investors) outflows led to nervous moments ahead of derivatives expiry due on Thursday. Over the course of two trading sessions since Friday last week, BSE Sensex has lost 896 points. We take a look at seven reasons that hurt the market sentiment today.
Global political uncertainties
The Sensex today registered more losses by plunging 450 points on across the board selling amid weak Asian cues after German Chancellor Angela Merkel won a fourth term with an uneasy coalition to form the next government. Following the development, the euro slipped on Monday as German Chancellor Angela Merkel faced a fractured parliament as support for the far-right surged. The New Zealand dollar also took a hit as the ruling National Party won the largest number votes in a weekend election but failed to secure a ruling majority. New Zealand dollar — world 11th most-traded currency — fell 1% to $0.7270 against US dollar.
Weaker Asian markets
Asian shares were mixed on Monday as investors turned their attention to global politics and evaluated weekend election results from Germany and New Zealand, Associated Press reported. Japan’s Nikkei 225 index rose 0.4% to 20,386.32 as the yen’s renewed strength made the country’s stocks more attractive to foreign investors. But South Korea’s Kospi lost 0.5% to 2,377.41 points, Hong Kong’s Hang Seng shed 1% to 27,590.07 points and the Shanghai Composite in mainland China fell 0.4% to 3,340.54 points, weighed by concerns about China’s economy.
China rating downgrade
The concerns over Standard & Poor’s announcement late Thursday that it was downgrading China’s credit rating, citing rising debt levels, continued to weigh. S&P lowered its sovereign rating by one notch, to A+ from AA-, saying credit growth increased China’s economic and financial risks. Despite the cut, China still remains five notches above India. Earlier, the agency had warned that rising local debt was putting pressure on China’s performance.
“The downgrade reflects our assessment that a prolonged period of strong credit growth has increased China’s economic and financial risks.The increases have often been above the rate of income growth. Although this credit growth had contributed to strong real GDP growth and higher asset prices, we believe it has also diminished financial stability to some extent,” S&P said in a statement.
North Korea fears
However, there is no further blow from North Korea but worries still remain amid the market participants. Earlier last week, geopolitical tensions edged up after US President Donald Trump authorized stiffer new sanctions in response to North Korea’s nuclear weapons advances, which drew furious response from Pyongyang. North Korean leader Kim Jong Un retaliated by calling Trump “deranged” and saying he’ll “pay dearly” for his threats, while Kim’s foreign minister reportedly said the country might plan to test a hydrogen bomb in the Pacific Ocean.
Heavy sell-off in blue-chip stocks
The stocks of heavyweight companies such as HDFC, HDFC Bank, ITC, L&T, Kotak Mahindra Bank, Maruti Suzuki, Mahindra & Mahindra, Axis Bank, Tata Steel, Infosys, and State Bank of India contributed the most to the Sensex decline. Collectively these 11 alone shaved off about 325 points. Shares of Adani Ports, Tata Steel, Kotak Mahindra Bank, Mahindra & Mahindra, L&T, HDFC, ITC Bharti Airtel, and Hero MotoCorp were the biggest loser on the index, fell up to 4%.
Foreign portfolio investors exit
Foreign portfolio investors (FPIs) sold shares worth Rs 1,241.73 crore last Friday, showed provisional data from the stock exchanges. Domestic institutional investors (DIIs) bought shares worth a net Rs 521.17 crore.
Dull Wall Street closing
US stocks closed with marginal gains on Friday. The Standard & Poor’s 500 index rose 0.06 percent to 2,502.22 points. The Dow Jones industrial average shed 0.04% to 22,349.59 points. The average was held back by a loss in Apple, which slid $1.50, or 1 percent, to $151.89. The Nasdaq composite added 0.07% to 6,426.92 points.