Investors lost over Rs3tn yesterday, as the benchmark BSE Sensex nosedived 787 points, tracking spike in global crude oil prices and rupee slipping below the 72-mark. This is Sensex’s biggest single-day fall since September 2019.
The BSE Sensex tumbled 1.9% to close at 40,676.63 points, and with this, equity market capitalisation came down to Rs153tn from Friday’s close of Rs156tn.
Crude oil prices hit a near nine-month high due to increased tensions between the US and Iran, after the US killed Iran’s top commander General Qassem Soleimani early on Friday.
“Indian market is reacting more negatively than other emerging markets due to crude oil impact. Since our dependence on crude imports as a percentage of consumption is the highest, the impact on economy and markets is also higher,” said Rusmik Oza, senior vice president and head of fundamental research at Kotak Securities.
Owing to the negative market breath, 28 of 30-share Sensex closed in the red. Overall, 603 shares advanced, while 1,944 shares declined on the BSE. Among sectoral indices, Metal Index was the biggest loser and slumped 3% followed by BSE Bankex, which slipped 2.4%.
The market witnessed a deep dive due to unexpected spike in India’s 10-year bond yield from 6.50 to 6.55% and sustained weakness in the rupee.
The slump was also because of negative global flows, which is unlikely to escalate further. The advance to decline ratio was steeply down at 1:4, indicating the sell-off was broad-based.
“Along with crude, the negative impact of currency is also weighing on Indian markets. The geopolitical tension has increased the risk of unknowns which is getting factored into the market. Just before the event took place, India’s Nifty-50 index was trading in a new zone on the back of budget expectations.
However, forward PE of Nifty-50 at 19x was close to its previous peak which made it susceptible to any external shock,” Oza added.
The situation further intensified after President Donald Trump threatened sanctions against Baghdad on Sunday, following which Iraq’s parliament called on US troops to leave the country. Trump also threatened “major retaliation” against Iran if Tehran were to retaliate for the killing.
“Escalating tensions may dent market risk appetite and weigh down on riskier assets like global equity markets and commodities like base metals. However, it may continue to lend support to safe haven like gold and silver and will also be supportive of crude oil prices amid worries over supply disruption from the region.
The Middle East accounts for nearly half of the world’s oil production, while Iraq is the second largest producer among the Organisation of the Petroleum Exporting Countries (Opec),” Ravindra Rao, vice president – head commodity research at Kotak Securities, said.
Meanwhile the Indian rupee weakened to almost two-month low against US dollar yesterday on concerns over rising tension in the Middle East outweighed the market’s recent optimism surrounding a US-China trade truce.
The rupee closed at 71.94 a dollar, down 0.18% from Friday’s close of 71.81. The Indian unit had opened at 71.99 and so far today has touched a low of 72.12 a dollar.
Oil prices rose close to 2% yesterday, pushing Brent above $67 a barrel, as rhetoric from the US, Iran and Iraq fanned tensions in the Middle East. Brent crude futures soared to a high of $70.74 a barrel and was at $70.03 yesterday, up $1.43, or 2.1%, from Friday’s settlement. US West Texas Intermediate crude was at $64.15 a barrel, up $1.10, or 1.7%, after touching $64.72 earlier, the highest since April.
Yield on the 10-year government bond was at 6.571% compared with its previous close of 6.515%.
Year to date, the rupee has weakened 0.78%, while foreign investors have bought nearly $202.90mn in Indian equities and sold $189.30mn in debt.
In pre-opening trade, the benchmark Sensex index was down 0.1% or 56.97 points at 41407.64 points. Since April, the index has gained 0.5%.
Asian currencies also traded mixed. South Korean won fell 0.43%, Taiwan dollar 0.15%, Indonesian rupiah 0.1%, China renminbi 0.07%, China Offshore 0.04% and Malaysian ringgit 0.03%. However, Thai baht gained 0.13%, Hong Kong dollar 0.12%, Philippines peso 0.05%, Japanese yen 0.04% and Singapore dollar 0.007%.
The dollar index, which measures the US currency’s strength against a basket of major currencies, was at 96.574, down 0.27% from its previous close of 96.838.
from Gulf Times https://ift.tt/2N3VGPM
Comments
Post a Comment