Demonetisation ravages stock markets

Market continued to decline for the fourth consecutive week, tumbling by another 669 pts to end at six-month low at 26,150.24 after fears of acute cash crunch arising out of the government’s recent decision to remove high-value notes. Sustained foreign capital outflows coupled with sharp depreciation of rupee value against the dollar also affected the equity market.  The rupee suffered a big blow — breaching the key psychological 68-mark to end near nine-month low to 68.13 against the dollar — as sentiment turned bearish on combination of growing US rate hike expectations and stunning dollar run. 

Moreover, investors worried that the recently elected US president Donald Trump’s policies stance — from protectionism and fiscal expansion — will boost inflation and lead the Federal Reserve to raise interest rates more than expected. US bond yields surged which triggered concerns that a higher interest rates in the US will spark capital outflows from the emerging equity markets. Besides, a mixed trend on other Asian stock markets also influenced the trading momentum in the domestic equity market.

In the week ended, the S&P BSE Sensex fell by 668.58 points or 2.49 pct to settle at 26,150.24 its lowest level since May 25, 2016. The sensex has tumbled by 1,926.94 points or 6.86 pct in four weeks. The Nifty 50 index fell 222.20 pts or 2.68 pct to end at 8,074.10. The Nifty has also dropped by 618.95 or 7.12 pct in four weeks.

On the macro front, data released by the Government after market hours on Tuesday CPI inflation dipped to 4.2 pct in October 2016 compared with 4.39 pct in September 2016. Both the Bombay Stock Exchange (BSE) and National Stock Exchange (NSE) remained closed on Monday, November 14 on account of Guru Nanak Jayanti.

Meanwhile, foreign portfolio investors (FPIs) and foreign institutional investors (FIIs) sold shares worth whopping Rs 6,160.09 crores during the week, as per Sebi’s record including the provisional figure of November 18. In the broader market, the BSE Mid-Cap index lost 391.59 points or 3.14 per cent to settle at 12,072.43 and the BSE Small-Cap index dippped 616.13 points or 4.93 per cent to close at 11,868.94. The fall in both these indices were higher than the Sensex’s decline in percentage terms. Among sectoral and industry indices, metal fell by 6.42 per cent, followed by consumer durables 6.28 per cent, IPO 4.89 per cent, realty 4.50 per cent, FMCG 4.20 per cent, banking 3.88 per cent, auto 3.42 per cent, capital goods 2.17 per cent, healthcare 1.75 per cent. However, power and IT gained by 0.86 pct and 0.10 pct, respectively.

Among the 30-share Sensex pack, 22 stocks declined and remaining 8 stocks rose in the week. Tata Steel was the biggest loser in the Sensex pack down 9.78 per cent to Rs 385.10 followed by Tata Motors by 7.17 pct, ITC 6.21 pct, Asian Paints 5.85 pct, Adaniports 5.68 pct, Coal India 5.31 pct, HDFC Bank 5.01 pct, Axis Bank 5.01 pct, ICICI Bank 4.49 pct Maruti 3.43 pct, Bajaj Auto 2.77 pct, Lupin 2.75 pct, GAIL 2.56 pct and Larsen 1.50 pct.

However, State-run Power Grid Corp of India was the biggest Sensex gainer, up 4.78 per cent to Rs 191.90 followed by NTPC by 4.31 per cent, SBIN 1.03 per cent, TCS 0.86 per cent and Bharti Airtel 0.50 per cent. The total turnover during the week on BSE and NSE fell to Rs 15,905.20 crore and Rs 94,503.03 crore, respectively, as against last weekend’s level of Rs 19,010.81 crore and Rs 1,28,204.91 crore.

Gold extended its downward spiral for the second week in a row and closed below the psychological important Rs 30,000-mark, its lowest level since 5-1/2 month at the domestic bullion market here on heavy unwinding from investors and jewellery traders investors amid weak global cues. The global turnaround in gold along with government demonetisation of higher currency to curb black money amid ensuing cash crunch, IT surveys on big jewellery showrooms cast its shadow in domestic yellow metal business.

Silver too plummeted sharply to end below the Rs 42,000 mark — its lowest level in six months — on frantic selling by stockists and investors coupled with lack of demand from industrial units. The bullion market was closed on Monday on account of “GuruNanak Jayanti”.