Cash crunch bites bulls: Sensex falls 385 points to 6-month lowhttps://indianexpress.com/article/business/market/sensex-slips-for-6th-day-sinks-385-points-nifty-below-8000-4387798/

Cash crunch bites bulls: Sensex falls 385 points to 6-month low

While domestic cash crunch following demonetisation drive to curb black money played its part, the rupee volatility - which slid from initial gains - sparked intense selling pressure.

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The Bombay Stock Exchange. (File Photo)

Falling for the sixth straight session, the Sensex on Monday plunged 385 points to hit a fresh six-month low of 25,765.14 and Nifty fell below the key 8,000-mark in a sell-off amid concerns over the impact of demonetisation — especially the cash crunch — coupled with foreign fund outflows.

Dragged down by bank stocks, the Sensex which resumed higher at 26,246.70, hovered in a range of 26,270.28 and 25,717.93 before ending at fresh six months low at 25,765.14, showing a loss of 385.10 points or 1.47 per cent. It last settled at 25,881.17 on May 25. The 30-share index has dropped by 1,752 points or 6.37 per cent in the last six days. The NSE 50-share Nifty dipped by 145 points, or 1.80 per cent, and ended at a fresh six-month low of 7,929.10 with PSU banks bearing the brunt.

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“The cash crunch situation continued to spook sentiment and foreign fund outflows intensified the blow. Bank stocks which were outperforming till date on expectations of benefiting from demonetisation due to sharp increase in deposits have started to lose trend due to increased concern over liquidity issue and effective leveraging of funds,” said an analyst. Shares of PSU banks plunged up to 9 per cent Monday, mainly weighed down by PNB, amid profit-booking in line with a weak stock market.

Anand James, chief market strategist, Geojit BNP Paribas Financial Services, said: “Even as stock prices adjust to a new normal post the demonetisation drive, the dollar’s continued surge has ensured that FIIs persist with the exit theme, putting unrelenting stress on Indian stocks. FIIs have also taken out over Rs 12,000 crore from Indian debt instruments, while US treasury yields have continued to surge. The approaching F&O expiry has also brought with it added pressure. This has meant that neither a fresh start to the week or rise in crude oil has brought any respite to sentiments.”

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Analysts said the market is worried about the US monetary policy in view of last week’s hints by US Federal Reserve chairperson Janet Yellen on potential rate hike next month and anticipation that President-elect Donald Trump will resort to protectionism and fiscal expansion.

Meanwhile, the rupee slipped further by 3 paise to close at 68.16 per dollar on the back of sustained dollar demand from importers amidst fall in stock markets.