Hit by sustained foreign fund outflows, rising oil prices and geo-political concerns, stock markets on Monday declined for the eight straight session as investors kept from taking fresh positions. Though other Asian markets rallied, the 30-share BSE Sensex fell by 310.51 points, or 0.87 per cent to finish at 35,498.44, while the broader NSE Nifty declined 83.45 points, or 0.78 per cent, to 10,640.95.
The rupee weakened by 11 paise to end at 71.34 against the US dollar amid firming crude oil prices and persistent foreign fund outflows. “Markets remained on a selling spree as declining foreign inflows due to fear of escalation of tensions at the border impacted the sentiment. The rupee weakened and the 10 year bond yield inched up… and rising oil prices are expected to weaken domestic macros. Volatility in the market is likely to continue due to lack of domestic triggers and investors are likely to remain cautious. Global market stands positive supported by hope in US-China trade deals,” said Vinod Nair, head of Research, Geojit Financial Services.
Banking, FMCG, IT, auto and pharma stocks fell on heavy selling. Banking shares weakened after Reserve Bank Governor Shaktikanta Das said he will meet heads of public and private sector banks this week to discuss transmission of interest rate cuts to borrowers.
Earlier this month, the Reserve Bank cut the benchmark interest rate by 0.25 per cent to 6.25 per cent. Sectorally, BSE bankex, auto, FMCG, healthcare, metal and teck indices declined up to 1.36 per cent. Only telecom and realty ended in the green, gaining up to 0.88 per cent. Broader indices ended lower, with the BSE Midcap and Smallcap losing up to 1.04 per cent. Jayant Manglik, President, Religare Broking, said, “Nifty started the week on a feeble note and lost nearly a per cent. Though it opened with an uptick taking cues from the Asian counterparts, the market faced selling pressure and the index majors erased all the gains in no time. Participants were in cautious mood ahead of the RBI board meet and sharp rise in the volatility index, India VIX, further dampened the sentiment.”
Stocks of Reliance Group companies zoomed by up to 11.3 per cent after the Anil Ambani-led Group reached a ‘standstill agreement’ with more than 90 per cent of its lenders under which they will not sell any of the shares pledged by promoters till September. Shares of Reliance Power zoomed 11.27 per cent and Reliance Communications advanced by 10.91 per cent.
Reliance Infrastructure jumped 7.40 per cent while Reliance Home Finance gained 6.71 per cent. Reliance Naval and Engineering soared 5.15 per cent on the BSE. Reliance Capital gained 2.86 per cent and Reliance Nippon Life Asset Management 2.64 per cent. Under the pact, the group will pay the principal and interest amounts to the lenders as per the scheduled due dates. It has also appointed investment bankers for part placement of the group’s direct 30 per cent stake in Reliance Power to institutional investors. “The rise in crude oil prices along with foreign fund outflows remained cause of concern for rupee, said V K Sharma, Head PCG and Capital Markets Strategy, HDFC Securities. Oil prices today touched the highest levels since November 2018.
Crude oil has surged more than 20 per cent this year as Saudi Arabia and Russia pledged to expand their output cuts and on concern that US sanctions against Venezuela and Iran will exacerbate a tightening of supply. Brent crude futures, the global oil benchmark, was trading 0.15 per cent higher at $ 66.36 per barrel.
Investors are now eyeing global cues like US-China trade talks in the absence of any major event. On the local front, the recent profit taking phase in private banking counters and IT majors, which were holding the benchmark index, are added negatives. “We feel traders have no option but to follow the prevailing bias and prefer hedged positions instead of naked trades,” they said.