Sensex tanks on poor rain forecast, fear of FII selloff

Tags: Stock Market
Stocks slumped in Mumbai trading on Wed­nesday after crude price rose, March retail inflation quickened to 8.31 per cent and a private forecaster predicted erratic rainfall during the June-September monsoon season.

Fears that foreign investors, who turned net sellers in the previous two sessions, could be booking profits also led to broadbased selling. FIIs have pumped $4.8 billion into Indian equities so far this year.

Equity benchmark Sensex fell by 207 points to hit a closing low in two-and-a-half weeks at 22,277.23 amid widespread selling in largecap, midcap and smallcap shares.

It was the third consecutive session of loss for Sensex after it had peaked at 22,715 on March 10. The broadbased Nifty index fell by 57.80 points, or 0.86 per cent, to 6,675.30.

Brent price, which is closely linked to the price of India's crude import basket, shot up to $110.08 a barrel on Wednesday for June contracts in the futures market.

On Tuesday, government data showed wholesale price inflation rose at a faster-than-expected 5.70 per cent in March from a year earlier on higher food, fuel and manufacturing costs.

It was the quickest pace since December 2013 and snapped a three-month easing trend.

Private weather forecaster Skymet on Tuesday projected monsoon rainfall to be below normal at 94 per cent of the long-range average as El Nino is likely to hit rains. But it said India might just escape an overall drought.

“Investors should focus on the coming monsoon, as we think that holds the key to CPI (consumer price index) inflation,” said Indranil Sen Gupta and Abhishek Gupta, India economists at Bank of America Merrill Lynch. “As it is, hailstorms have driven up food prices and pushed up March CPI to 8.3 per cent from 8 per cent last month.”

The market breadth, indicating the overall health of the market, was weak on Wednesday. Out of the 2,987 stocks traded on the Bombay Stock Exchange (BSE), 1,732 declined and 1,119 advanced. The BSE midcap and BSE smallcap indices saw bigger losses of 1.08 per cent and 1.11 per cent, respectively.

China's economy expanded at its slowest pace in 18 months, with gross domestic product (GDP) growing just 7.4 per cent between January and March. But it was slightly above analysts' estimates, raising fears that inflow of foreign portfolio investments will start shifting to China from India.

Vinod Nair, head of fundamental research at Geojit BNP Paribas Financial Services, said: “Asian stocks trended higher as China's GDP data was a tad better than analysts' projections (7.3 per cent). Better data inputs from China led to fears that some of the FII inflows that got reallocated to India due to concerns over the Chinese economy might get diverted from India."

At the same time, Indian companies that export iron ore and other raw materials to China are likely to be impacted by faltering GDP growth in the world's second largest economy, analysts said.

Foreign institutional investors, the main drivers of the Indian equity market, have turned net sellers in the last three sessions, casting a shadow on how they are going to behave over the short to medium term.

On Wednesday, FIIs were net sellers of equities worth Rs 44.69 crore while domestic institutions were net sellers by Rs 347.70 crore. Sebi data showed FIIs were net sellers of equities worth Rs 68.81 crore on March 11 and Rs 15.35 crore on March 15.

Realty (3.87 per cent), capital goods (2.47 per cent) and IT (2.49 per cent) indices were the top losers on BSE, while FMCG and metal indices bucked the trend with modest gains of 0.63 per cent and 0.19 per cent, respectively.

Tata Power (3.61 per cent), Infosys (3.19 per cent), BHEL (3.17 per cent), Wipro (2.90 per cent), L&T (2.87 per cent) and Tata Consultancy Services (2.51 per cent) were among the top losers in the 30-stock Sensex pack.

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