India : Oil rally drags Sensex 232 pts, Nifty below 8200; banks weigh

Bears strengthened their position on Monday as equity benchmarks fell 1 percent on top of 2 percent loss in previous week. Sharp rally in crude oil prices, contraction in factory data and likely delay in GST implementation drove the market lower. In addition, globally investors also maintained cautious stance ahead of two-day Federal Reserve’s meeting that will begin on December 13.The 30-share BSE Sensex plunged 231.94 points or 0.87 percent to 26515.24 and the 50-share NSE Nifty fell 90.95 points or 1.10 percent to 8170.80.

Experts expect the market to fall further in near term as concerns raised over inflation after spike in crude oil prices and economic growth due to volatility in factory data.

“We don’t think the worst is over for the market. We continue to be concerned about a demand slowdown, worse than current market belief and problems for the financial system,” Neelkanth Mishra of Credit Suisse says.

Vinod Nair of Geojit BNP Paribas Financial Services says the prospects of a Fed rate hike is almost factored by the market but the focus remains on US economic outlook & inflation, though investors are likely to view the event in conjunction with the policy stance of the newly elected US president.

The broader markets also caught in bear grip as the BSE Midcap dropped over a percent on weak breadth. About 1544 shares declined against 1107 advancing shares on the BSE.

Crude oil prices jumped over 4 percent to their highest level since 2015 after OPEC and other producers over the weekend agreed to jointly reduce output in order to rein in oversupply.

European stocks were mixed as political uncertainty in Italy eased and investors awaited another rate decision from the US Federal Reserve. In Asia, China’s Shanghai plunged 2.5 percent after regulatory curbs on aggressive share purchases by insurers ahead of FOMC meeting. Hong Kong’s Hang Seng declined 1.44 percent while Japan’s Nikkei gained 0.84 percent.

Meanwhile, industrial output has seen contraction of 1.9 percent in October against growth of 0.7 percent in previous month and CNBC-TV18 poll of 1.06 percent.

Banks, FMCG, auto, metals, select healthcare and technology stocks were under pressure whereas oil exploration companies gained.

Nifty Bank fell 1.6 percent as PNB, Axis Bank, Bank of Baroda, ICICI Bank, HDFC Bank and SBI were down 1-3 percent. Sources told CNBC-TV18 that the Income Tax Department and Enforcement Directorate continued to maintain a strong vigil on banks across the country. Finance ministry official said Enforcement Directorate has been closely monitoring cases of money laundering by bank officials.

State Bank of India started off day on a positive note after the bank sold stake 3.9 percent stake in its insurance subsidiary SBI Life for Rs 1,794 crore, but failed to sustain those gains.

After sharp spike in crude oil prices, upstream companies like ONGC gained 1.4 percent but oil marketing companies – HPCL, BPCL and IOC lost 2-4 percent. Even aviation stocks like Jet Airways, SpiceJet & InterGlobe Aviation and paint companies like Asian Paints, Berger Paints & Kansai Nerolac were down 2-5 percent.

Technology stocks were under pressure on fears of stricter norms for H1B visa after US President-elect Donald Trump statement. Infosys, Wipro, HCL Technologies and Tech Mahindra declined 0.4-1 percent while TCS rebounded 0.6 percent after early fall.

Among others, ITC, Tata Motors, M&M, Maruti Suzuki, Adani Ports, HUL, Hero Motocorp and Bajaj Auto were down 1-2.5 percent.