Market trims losses in last hour but fiscal woes drag Sensex 296 pts, Nifty below 9,900

The market sentiment was badly hit by likely worries over fiscal deficit as the BSE Sensex plunged 448 points intraday Monday, but recovery in the last hour of trade helped it trim losses and settle with a loss of 296 points.

The fall was largely driven by banking & financials (barring ICICI Bank), FMCG, infra, auto and pharma stocks. The broader markets also recovered along with benchmarks.

The 30-share BSE Sensex was down 295.81 points or 0.93 percent at 31,626.63 while the 50-share NSE Nifty ended below 9,900 level, down 91.80 points or 0.92 percent at 9,872.60.

Experts expect the market to consolidate further with a negative bias in near term, at least till the announcement of July-September quarter earnings that will begin in the second week of October.

“It is probably a part of the bull market correction and in bull market correction, the market can fall 10-12 percent,” Anish Damania, Head of Institutional Equities said in an interview to CNBC-TV18.

He still maintained his Nifty target for March 2018 at 9,825 level. He said the correction was warranted as the Nifty has seen one-way rally from 7,900 to 10,200 levels despite earnings growth and business growth.

“The market was looking for a reason to correct. Global factors such as geo-political tensions, the US dollar strengthening and the second straight month of selling from the FPI/FII segment played their role,” Kunj Bansal – Executive Director & CIO – Equity, Centrum Wealth Management said.

The fall was largely because of worries of likely increase in fiscal deficit, especially after expectations of fiscal stimulus.

Media reports indicated that the government could announce a stimulus package worth more than USD 7 billion, which may widen the fiscal deficit for the financial year ending March 2018 to 3.7 percent of GDP from a budgeted target of 3.2 percent.

“Stimulus can potentially increase the central government’s fiscal deficit to 3.5-3.7 percent of GDP in FY18, from the budgeted 3.2 percent target (3.5 percent of GDP achieved in FY17), depending on the size of the stimulus (0.3-0.5 percent of GDP),” Deutsche Bank said in a report.

Today’s fall wiped out investors’ wealth by about Rs 1.4 lakh crore, on top of Rs 2.68 lakh crore erosion in previous session.

The BSE Midcap index lost 1 percent and Smallcap shed 2 percent.

The gap between advances and declines also narrowed in the last hour of trade. The advances:declines ratio at the end stood at 1:3 against 1:8 in morning.

Meanwhile, the rupee closed sharply lower at 65.10 against the US dollar, down 31 paise from Friday’s close of 64.79 on fall in equity markets.

All sectoral indices ended in the red but recovered from day’s low. Nifty Metal, Pharma, Auto and FMCG fell the most, down 1-1.8 percent followed by Bank with 0.84 percent loss.

Index heavyweights ITC (down 2.3 percent), HDFC Bank (1.33 percent) and HDFC (1.45 percent) were leading contributors to Nifty’s fall.

Among others, IOC, Adani Ports, L&T, Kotak Mahindra Bank, Maruti, Eicher Motors, M&M, SBI, ACC and Tata Steel slipped 1-3 percent whereas ICICI Bank (up 0.87 percent), HUL (0.64 percent) and Reliance Industries (0.51 percent) outperformed.

TCS also gained 0.3 percent, may be due to correction in rupee.

In broader space, Shoppers Stop was locked at 20 percent upper circuit as the investment arm of Amazon will buy 5 percent equity stake in the company. Oberoi Realty gained nearly 4 percent on residential project deal with Glaxo Pharma.

Coffee Day Enterprises plunged 8 percent as a media report indicated that Income Tax Department has detected undisclosed income worth over Rs 650 crore linked to the group after raids.
Disclosure: Reliance Industries Ltd. is the sole beneficiary of Independent Media Trust which controls Network18 Media & Investments Ltd.