Sensex, Nifty crack over 3% amid global rout
Markets tumbled yet again on Thursday, with the benchmark indices slipping over 3 per cent in intra-day deals. The S&P BSE Sensex lost over 800 points to 22,937 levels, while the Nifty50 index skidded nearly 250 points to 6,942 levels.
The Nifty has breached the 7,000 levels for the first time since May 2014. The benchmark indices now have tumbled nearly 23% from their peak levels.
“Markets fell steeply on the back of continuing concerns about a global slowdown and the consequent impact on the financial sector. The US Fed also did not provide any further clarity on the possible interest rate movements. Quarterly results declared over the past few days have also not met up to the muted expectations and that also impacted sentiments," said Dipen Shah, Senior Vice-President & Head of Private Client Group Research, Kotak Securities.
"Going ahead, global concerns will remain at the centre-stage and will likely dictate market sentiments. On the domestic front, we need to closely watch the budget where the FM has a difficult task of supporting growth while maintaining fiscal prudence,” he added.
Vinod Nair, head-fundamental research, Geojit BNP Paribas Financial Services, adds: "Surprisingly on a faster note, the bears pulled down the market below the 7,000 level which had until now been a strong support point. The market turnover is continuously coming down and the market’s momentum is determined as per the trader’s trend.
The continuous fall in risky assets across the globe and the the trend in liquidity moving towards safe haven assets like bonds and gold are expanding the negative implications on the Indian market. The turmoil in the domestic market also does highlight the possibility of margin pressure which may continue to disturb the market."
Here are 5 reasons why the Sensex slipped over 800 points on Thursday:
Janet Yellen’s testimony: Global markets lost ground in the morning deals itself, after the US Fed chair, Janet Yellen, in a testimony on Wednesday left the door open for more rate hikes in calendar year 2016 (CY16).
"Janet Yellen’s testimony to Congress yesterday was not what the markets had wanted to hear. The initial market response certainly seems to be that she fell short of expectations. Indeed, although the S&P closed little changed it gave back all the healthy gains it had made pre-Yellen.
Indeed, overall it seems the Lady is still for hiking, just not as aggressively as the ‘25bp a quarter’ December dot plot had suggested just six weeks ago," analysts at Rabobank International said in a note.
Unsupportive global markets: Global markets, too, have been on a slippery slope with most Asian indices losing considerable ground on Thursday. In other Asian markets, Hong Kong closed 3.8% lower as investors there returned from a three day closure for the Lunar New Year. Markets in Tokyo are closed for a public holiday. Major European indices fell sharply on Thursday over oil price concerns and after US Federal Reserve boss Janet Yellen raised concerns about the global economy. The FTSE 100, CAC 40 and DAX slipped 2.4 per cent - 3.8 per cent.
SBI’s December quarter results: The fall in the market was aggravated after State Bank of India (SBI) declared 62 per cent drop in its net profit for the December quarter at Rs 1,115.34 crore (Rs 11.15 billion) against Rs 2,910.06 crore (Rs 29.1 billion) on the back of higher provisioning. Provisions, during the quarter under review, rose to Rs 7,644.62 crore (Rs 76.44 billion) versus Rs 4,810 crore (Rs 48.1 billion) in the same quarter last year.
"There was 82 per cent rise in provisions due to higher NPA recognition. However, given the size of the balance sheet, SBI has fared well compared to other PSU banks. The bank certainly will need capital for meeting future growth; again on this count also it stands better than other PSU banks.
Though stress is likely to persist in the system SBI is better positioned to meet the challenges given its decent capital adequacy of 12.45 per cent. Hence, we have an ACCUMULATE Rating on the stock,” said Vaibhav Agrawal, vice-president for banking research at Angel Broking.
Banking sector woes: The latest results of SBI has yet again rekindled fears that the worst may not be over for the banking sector as regards asset quality and non-performing assets. Banking sector was among the worst hit in trade on Thursday, with the Bank Nifty sliding nearly 4 per cent, as compared to 3.5 per cent fall in the Nifty 50 index. Canara Bank, Bank of India, Kotak Mahindra Bank, SBI, HDFC Bank, ICICI Bank and Axis Bank were some of the major losers that slipped 2.7 per cent - 7 per cent.
Oil prices: Oil slid on Thursday, raising fresh concerns about the slowing world economic growth. Brent crude futures were down 31 cents at $30.53 per barrel at 0850 GMT. US West Texas Intermediate (WTI) crude futures were at $26.76 per barrel, down 69 cents and not far off from the $26.19 intraday low hit in January, which was their weakest price since 2003.
