The Indian market tanked over one-and-a-half per cent as a wave of sell-offs wafted through the global equities on rising geopolitical tensions.
The BSE Sensex plunged 572.28 points (1.59 per cent) to close at 35,312.13. Similarly, the broader NSE Nifty fell 181.75 points (1.69 per cent) to settle at 10,601.15, as sentiments turned downbeat ahead of the Opec meet in Vienna, growing anxiety ahead of the assembly elections results and deterioration of the rupee.
Global stock markets continued to drop sharply on Thursday after having started the week in a buoyant mood.
Analysts said investors seem to have lost confidence in the long-term effectiveness of the agreement struck between US president Donald Trump and Chinese president Xi Jinping at the G20, and were further shaken on Thursday by news that Huawei’s chief financial officer Sabrina Meng Wanzhou was detained by Canadian authorities at the request of the US government. Wanzhou has been arrested for allegedly attempting to evade newly implemented US sanctions that kicked in at the start of November.
At a time when markets are ultra-sensitive to any trade-related news, risk assets have taken a beating on the development.
“Global markets are in a risk-off mode due to fresh flare-up of tensions between China and the US. Oil prices are inching up on the expectation of production cuts by Russia and Opec, weakening the rupee further,” said Vinod Nair, head (research), Geojit Financial Services.
“The sell-off was broad based, while IT and auto were the worst hit. Investors are in wait and watch mode on account of evolving global macro headwinds and state elections,” Nair said.
Exit poll for key states will be announced on Friday after 5.30 pm and actual results will be out on Tuesday (December 11). Analysts point to a tight race in two and a potential loss for the ruling party in one state.
“Proximity to general elections (April/May 2019) increases the market relevance of state elections. Results will be taken as a reflection of the underlying mood, especially on reform-led disruption and regional hot-button issues like rural policies and concern over farm distress,” said Radhika Rao economist at DBS Bank in a November 26 note.
“Markets have been extremely volatile for last one month and still there’s no sign of slowing down, thanks to the upcoming events. Such condition poses threat mainly to traders as they end up losing on both sides. We suggest preferring hedged options trades instead of futures until market stabilises. The Nifty has breached its crucial support at 10,700 and now 10,400 would act as cushion,” Jayant Manglik, president, Religare Broking, said.
According to analysts, capital markets had a rough day, as they tried to navigate too many data points such as re-emergence of sharp weakness in the rupee, Opec meeting outcome in terms of production cut, and upcoming assembly poll results.
“The nervousness is quite evident, as there is sharp sell-off across the industries, and especially in those stocks where there are corporate governance concerns. We feel investors should be ready with shopping-list of stock ideas, as the markets can surprise on upside if macros stabilise, and election results come out palatable to markets,” said Jagannadham Thunuguntla, senior vice-president and head of research (Wealth), Centrum Broking.