The benchmark Sensex on Wednesday plunged 488 points and the rupee declined by another 28 paise against the dollar as global markets fretted over the outcome of a crucial round of US-China trade negotiations and foreign investors cut down their exposure.
The BSE Sensex plummeted 487.50 points, or 1.27 per cent, to end at 37,789.13 while the broader NSE Nifty sank 138.45 points, or 1,20 per cent, to 11,359.45. The rupee closed at 69.71 against the US currency amid outflows of capital from the stock market.
According to analysts, global markets came under pressure after months of talks between the US and China were upended after US President Donald Trump on Sunday threatened to raise tariffs on $200 billion worth of Chinese goods to 25 per cent from 10 per cent on Friday, retaliating against last-minute reversals by China. The flare-up in tensions between the world’s two top economies has sent investors scurrying to safe-haven assets like bonds, gold and the Japanese yen.
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Further, a weak rupee, mixed corporate earnings and caution ahead of the elections outcome added to the bearishness, analysts said. “Markets continued to slide as escalation in trade war and anxiety over global growth dampened the risk sentiment. Selling was broad based while the outflow of foreign funds may impact liquidity in the market. The ongoing Q4 results are not surprising the investors whereas the expectation continued to be positive. Stability in oil prices and drop in bond yield are some positive triggers for the market which will provide edge over other emerging markets,” said Vinod Nair, head of research, Geojit Financial Services.
General elections outcome also weighing on markets
While the concerns last week hovered around US decision to withdraw waivers on imports from Iran that led to a rise in crude oil prices and fall in equity markets, a growing concern over escalation of US-China trade war has spooked markets worldwide. The fall in Asian market followed a sharp decline in the US markets as the Dow Jones Composite fell 1.65 per cent on Tuesday and the nasdaq fell 1.96 per cent. In addition to the trade war fears, the Indian markets are also concerned over the outcome of the general elections, the results of which will be announced on May 23.
Reliance Industries was the biggest loser in the Sensex pack, falling 3.35 per cent, followed by Bajaj Finance, Tata Motors, Bajaj Auto, SBI and Vedanta. HDFC twins, Sun Pharma, NTPC, Yes Bank and IndusInd Bank were among the other laggards. “The domestic markets have been on the decline for the last two days mainly due to the flare up in the US-China trade war. A lack of an agreement between the two economies could hurt global growth in the near term.
“Q4FY19 earnings season so far has mainly been lackluster. Also, the ongoing general elections have kept major market participants cautious. FIIs, which have been supporting the market through their inflows, have turned sellers in the past few days. Expect markets to remain volatile until elections results (May 23rd),” said Hemang Jani, head – advisory, Sharekhan by BNP Paribas.
Other Asian bourses ended significantly lower following weak Chinese trade data. The Shanghai Composite Index declined 1.12 per cent, Hang Seng 1.23 per cent, Nikkei 1.46 per cent and Kospi 0.41 per cent. Investors are also watching the movement of crude oil prices. “Overall steep increase in crude works as a headwind for equity markets. India being a net importer of crude, higher crude oil prices widens our current account deficit and the rupee comes under pressure,” Rahul Agarwal, director, Wealth Discovery/EZ Wealth.