Sensex plunges 699 points as emerging markets bleed

Trump policies spark fears of capital flight from EMs; rupee down by 62 paise.

By: ENS Economic Bureau | Mumbai | Published:November 12, 2016 2:15 am

Joining a sell-off in emerging markets across the globe, the benchmark BSE Sensex on Friday crashed by 699 points and the NSE Nifty Index ended below the 8,300 level as investors feared higher US interest rates and new policies of incoming US President Donald Trump will spark capital outflows.

The Sensex on Friday touched a low of 26,777.18 before settling at 26,818.82, down 698.86 points, or 2.54 per cent, its biggest single-day fall since February 11 when it had lost 807.07. This was the weakest closing since June 29, 2016. It had rallied 265.15 points in the previous session.

The 50-share NSE Nifty broke 8,300-mark after plunging 229.45 points, or 2.69 per cent, to 8,296.30, its lowest closing since June 30. For the week, the Sensex dropped 455.33 points, or 1.66 per cent, while the Nifty lost 137.45 points, or 1.62 per cent.

The rupee fell below the 67 mark to end at over three-month low level of 67.25 against the US currency on fears of capital outflows amid resurgent dollar overseas. The rupee lost 62 paise, its second biggest single-day crash this year, to the weakest closing since July 26 when it had closed at 67.27.

Among Asian markets, Indonesia’s Jakarta Composite Index was off 3 per cent, the Philippines tumbled 2.9 per cent and Malaysia’s FTSE Bursa sank one per cent. Hong Kong’s Hang Seng Index was down 1.4 per cent, South Korea’s Kospi closed 0.9 per cent lower and Taiwan’s Taiex fell 2.1 per cent. “Global investors are favoring conditions in the US market,” said an analyst, pointing to soaring US Treasury yields. “We are seeing a general flowing to the US.”

Analysts said higher US interest rates could make emerging markets less attractive for global investors, sparking outflows and hitting currencies such as the rupee. “As euphoria surrounding US election settled, the prospects of outflows from emerging markets to the US, anticipating reform measures from Trump, and rise in US treasury yields has resulted in sharp sell-off in Asian markets. The anticipated rise in spending in US has also upped the ante for US FOMC rate hike in December,” said Anand James, chief market strategist, Geojit BNP Paribas Financial Services.

Profit booking ahead of long weekend also added to the selling pressure. Banks resisted the selling pressure for most part of the day, but gave in after SBI announced Q2 results.

Dipen Shah, senior vice president, Kotak Securities, said: “Markets reversed all the gains of the previous day and fell by more than 2 per cent on the back of weak global markets and concerns arising from the stronger US dollar and rise in yields in US. There are expectations of a rise in interest rates in the US and hence, a flow of money to the US. Apart from this, markets were concerned about the impact of the ban on Rs 500 and Rs 1000 currency notes on the trade, especially in the consumption sector. Going ahead, US rate hike and quarterly results are the other triggers, which will impact markets and stocks.”

All the sectoral indices were under pressure with auto and media indices losing 4.6 per cent and 4.5 per cent respectively. Banking, FMCG and IT indices lost over two per cent during the day.