Setting the stage for a dismal start of 2016, China’s equities crashed over 7 per cent on Monday sparking off a rout in key Asian markets and European bourses with India’s Sensex plunging 538 points to its lowest level in over three months. Further, mounting tension between Saudi Arabia and Iran and the fall in India’s manufacturing PMI also added to the nervousness of investors.
The rupee too plunged by 47 paise to a two-week low of 66.61 against the US dollar on heavy demand for the American currency from importers and banks largely impacted by global economic and political headwinds. Oil prices jumped more than 3 per cent in early trade but that rally fizzled on China’s stock woes and the global market crash.
The BSE Sensex remained in the negative zone and shed 2.05 per cent at 25,623.35, its weakest closing since September 22. The index had gained about 201 points in the last two sessions. The NSE Nifty fell below the 7,800-mark by losing 171.90 points or 2.16 per cent to 7,791.30 after hovering between 7,937.55 and 7,781.10. The selling in Indian market was led by telecom, banks, industrials, energy, capital goods and healthcare stocks.
Trading on the Shanghai and Shenzhen stock exchanges was ended early on Monday after shares fell seven per cent, the first time China’s new “circuit breaker” intervened to curb market volatility. The drop in the CSI300 index, which covers both bourses, for the first time triggered an automatic early closure under the new system, after an initial 15-minute trading halt failed to stem the declines. The falls followed poor data from official and private surveys of manufacturing in China. In addition, measures introduced to curb China’s mid-2015 share slump are about to expire.
Dipen Shah, Head of Private Client Group Research, Kotak Securities, said, “markets ended the day sharply lower as concerns over growth rate in China and the geo-political situation in Middle-East spoken sentiments. The contraction in India’s December PMI manufacturing numbers also impacted sentiments.”
“Apart from the global factors, the quarterly results will be the important trigger for individual stocks. We may see positive price movement for companies which are able to beat the already-subdued third quarter results expectations,” he said.
Jayant Manglik, President (retail distribution), Religare Securities, said, Nifty tanked over two per cent mainly on the global worries which further worsened with negative domestic cues. “Sentiments were weak from the beginning due to sharp cut in the Chinese equity markets on weaker than expected manufacturing data and mounting tension between Saudi Arabia and Iran. On domestic front, reports of lower foreign investment in equity market in the passing year as compared to the three preceding years further dented the sentiment. Besides, traders continued to remain worried as the manufacturing sector contracted significantly in December,” he said.
Japan’s Nikkei 225 fell 3.06 per cent, Hong Kong’s Hang Seng index 2.68 per cent, Shanghai’s Composite Index 6.86 per cent, Shenzen Composite tumbled 8.22 per cent, Taiwan’s Taiex 2.68 per cent, South Korea’s Kospi 2.17 per cent and Singapore’s Straits Times Index lost 1.68 per cent.