Concerns about the economic slowdown due to demonetisation, coupled with increasing foreign exchange outflows and an expected rate hike by the Fed in December, led to the benchmark indices erasing all the gains made in 2016 with the Sensex losing 385 points on Monday.
Banks, auto and real estate stocks were the worst hit.
The 30-share Sensex lost 385.10 points or 1.47 per cent – its sixth consecutive loss-making session – to close at 25,765.14. The index had lost 1,753 points in these six sessions. With Monday’s losses, the index had erased all the gains made so far in the current year. The Sensex had touched the year’s high on September 8 at 29,077.28.
On December 31,2015, the Sensex had closed at 26,117.54. The broader 50-share Nifty of the National Stock Exchange (NSE) fell below the psychological mark of 8,000 to close at 7,929.10, down 145 points or 1.80 per cent. Incidentally, Nifty had touched these levels on the day when Brexit voting results were announced. Interestingly, Nikkei and Hang Seng gained marginal ground.
Fed rate hike
“Globally, expectations of a rate hike by the Fed is leading to investors pulling the plug,” said Motilal Oswal, Chairman and Managing Director, Motilal Oswal Financial Services. “Passive funds are selling,” he added.
“Domestic events have resulted in cash scarcity in the system and that is resulting in hoarding of cash by the masses. This holding back of consumption will lead to slowing of the economy in the short-run and most people think the third quarter of FY17 will be a wash-out quarter,” he said.
A report byAmbit Capital said shortage of cash due to demonetisation could result in a drastic slowdown in gross domestic product (GDP) growth for 2016-17 to 3.5 per cent from an earlier projection of 6.8 per cent.
Data shows that foreign investors have been selling Indian shares in huge quantities in the last couple of months. In November, foreign investors have been net sellers at $1.45 billion – the highest since January this year when they pulled out $1.64 billion. In October, FIIs were net sellers at $633 million.
On Monday, the market sentiment was negative with 2,223 stocks losing ground as against only 408 gainers.
