Stock market tumbles in the wake of grim fiscal readings
MUMBAI: The stock market tumbled on Thursday spooked by fiscal deficit readings for the April-October period and State Bank of India’s move to raise bulk deposit rates. The weakness in global markets added to the concerns as traders carried forward fewer bullish bets to the December derivatives series on expiry of November contracts.
Benchmark indices posted their single biggest fall in a day since September 27. The Sensex fell 453.41 points, or 1.35%, to close at 33,149.35. The Nifty dropped 134.75 points, or 1.30%, to close at 10,226.55. Bank shares led the losses as investors understood SBI’s move to increase bulk deposit rates to portend higher interest rates.
“The worry in the market for now is that the cost of funds will go up. The deposit rate hike by the country’s biggest bank is a signal that rates may have bottomed out,” said Gopal Agrawal, chief investment officer (equities) at Tata Mutual Fund.
Kotak Mahindra Bank fell 2.6%, SBI declined 2.5% and Axis Bank dropped 2.4%. The BSE’s bank index fell 1.9%.
Worries about higher interest rates heightened after India’s fi scal deficit at the end of October hit 96.1% of the budget target for 2017-18 on account of lower revenues and increase in expenditure. Fiscal deficit was 79.3% in the same period last year.
The markets fear the government would borrow more and miss the fiscal deficit target for the year ending March 2018. Foreign portfolio investors sold shares worth a net Rs 1,500 crore, while their domestic peers bought shares worth Rs 1,203 crore.
The stronger-than-expected growth in the GDP data for the second quarter announced after trading hours could, however, allay market concerns about the state of the economy.
Weakness in the broader market was less pronounced on Thursday. The mid-cap index declined 0.55% and small-cap index rose 0.10%. Declines outnumbered advances 1426:1249 across categories on the BSE. The Volatility Index or VIX surged 3.75% to 13.55, suggesting traders were wary of risks to market in the near term. Analysts said volatility is likely to increase in December because of key events such as Gujarat elections, RBI policy and US Federal Reserve’s rate-setting meeting.
“While many think the market will be rangebound, I think the market is likely to see stronger swings,” said Rishi Kohli, chief executive of Proalpha Systematic Capital.
The markets are most concerned about the outcome of Gujarat elections, which are seen as a measure of Narendra Modiled BJP’s popularity among people mainly after GST and demonetisation. A below par BJP performance is unlikely to go down well with the investors.
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Via:: Economic Times – Stocks