Sensex hits 3-month low on weak global cues, capital outflow

After a brief recovery, the rupee once again turned shaky and ended lower by 17 paise at 66.88 due to frantic dollar demand from importers and FCNR redemptions.

Analysts said lacklustre results from TCS and Infosys fell short of market expectations with lower revenue guidance adding to the amrket woes. The sentiment was further impacted after US Federal Reserve chief Janet Yellen’s commentary on the US economy, indicating the need for aggressive steps to reboot it. The effect was immediate as indices globally started turning weak.

Investors are betting on a hike in interest rates by the US Fed before the end of this year. Profit-booking added to the nervousness of the market. “Nervous global markets following Fed chair’s comments last Friday, and sustained selling by FIIs seen all through last week look to have pricked sentiment, sparking long liquidation,” said Anand James, chief market strategist, Geojit BNP Paribas Financial Services.

Barring banking, all sectors ended lower with auto, capital goods and realty closing down by up to 2.12 per cent. M&M plunged by 3.22 per cent, followed by Hero MotoCorp (2.24 per cent), Asian Paints (2.07 per cent), HDFC Bank (1.87 per cent), Bajaj auto (1.80 per cent), L&T (1.71 per cent) and RIL (1.67 per cent).

Banking was in demand as concerns about bad loans eased after Russian Rosneft-led group took over private oil firm Essar Oil in an all-cash deal valued at about $ 12.9 billion.

Capital outflows due to FCNR redemption affected the rupee and the market. Extremely bullish dollar sentiment overseas backed by firm Fed rate hike hopes alongside an adverse spillover effect of $ 22.4 billion possible outflow in the wake of ongoing FCNR-B redemption largely added pressure on the local currency. Hopes for an interest rate cut with both retail and wholesale inflation easing and dovish central banks around the world seemed somehow cushioned the slide.

Jayant Manglik, president, Religare Securities, said, “Nifty almost tested its crucial support of 8500, pressurised by weak global markets and not so encouraging earning announcements. The sudden fall in auto, media majors along with select index heavyweights from other sectors, completely changed the tone and pushed the market lower. Feeble start in European markets further added to the pressure in the later half.” The banking pack, mainly private banking counters, helped Nifty hold above 8,500 and also aided marginal bounce in the end.

“At present, cues are mixed on both the domestic and global fronts, where negatives are certainly overweighing the positives due to cautious stance among the participants. For any recovery ahead, we need some decisive trigger … it could be positive surprise on the earnings front or sustained global recovery after the recent slide,” he said.