Concerns about the possible impact that Donald Trump’s economic and trade policies may have on U.S. interest rates and the economy sent global markets into a tizzy on Friday with benchmark Indian indices sliding to more than four month lows.
The 30-share Sensex fell 698.86 points, or 2.54 per cent, to 26,818.82.
The broader Nifty of the National Stock Exchange (NSE) closed the day at 8,296.30, down 229.45 points, or 2.69 per cent. This was the lowest close for the indices since June 30.
Indian shares fell across the board and even banking stocks that saw investor interest on the back of the recent demonetisation initiative of the government lost significant ground.
The BSE Bankex dropped 2.51 per cent, or 581 points. State Bank of India and ICICI Bank fell between 3 and 6 per cent. HDFC Bank, Kotak Mahindra Bank, Axis Bank, PNB, Bank of Baroda and Yes Bank ended the day in the red.
The overall market breadth was hugely negative with 2,223 stocks losing ground, as against only 460 gainers. All the sectoral indices also ended with significant losses.
Rate fears
“After their elections, the possibility of a rate hike in the U.S. resurfaced, which spooked the markets the world over,” said Jayant Manglik, president - retail distribution, Religare Securities. “Excessive volatility is causing damage to traders and they are finding hard to handle their positions,” he said.
“We do not see any relief from that front amid looming uncertainty on the global front and not-so-encouraging domestic cues. So, we suggest restricting leveraged positions and wait for the markets to stablise first,” he added.
An increase in interest rates in U.S. would make emerging markets less attractive for global investors, who have traditionally been the prime drivers of bull runs in India.
While foreign investors have put in Rs.43,800 crore in the Indian markets this year, October saw such investors pulling out Rs.4,306 crore from equities. In November, foreign investors have net sold Indian shares worth Rs.3,175 crore.
Tremors from these concerns were felt elsewhere in Asia too. The Hang Seng lost more than 300 points, while benchmark indices in Indonesia and Taiwan also fell.
