Stimulus elusive, Sensex drop 587 pts

The domestic equity markets slumped over 1.5% on Thursday despite the market regulator easing regulations for foreign portfolio investors in the absence of any fiscal stimulus to boost the economy.

BSE Sensex fell 669.02 points to touch an intra-day low of 36391.35 before it closed 587.44 points, or 1.59%, lower at 36472.93. NSE Nifty 50, too, touched an intra-day low of 10718.30 before closing 177.35 points, or 1.62% lower at 10741.35.

Of the 30-stock Sensex, Tech Mahindra (1.54%), Tata Consultancy Services (1.33%), Hindustan Unilever (1.21%) and HCL Technologies (0.63%) ended in the green, while the rest were all in red. Top losers were YES Bank, Vedanta, Bajaj Finance, Tata Motors, ONGC and Hero MotoCorp losing up to 13.91%.

Except IT which gained on the back of a weaker rupee, all sectoral indices on Nifty reported losses, led by Nifty Realty (-6.17%), Nifty PSU Bank (-3.77%), Nifty Metal (-3.49%) and Nifty Media (-3.08%).

Former finance secretary Subhash Chandra Garg said at an event that the GDP growth could slump to 5.5% in the June quarter of FY20 and better way to address the concern was through interest rate cuts. At the same event, chief economic advisor Krishnamurthy Subramanian said that the government "could not intervene every time a sector goes through a sunset".

Motilal Oswal Financial Services in a note said increasing USD-INR rate, rising Brent crude (surged to above $60/barrel), slowing economy and continuous FII selling have a negative impact on the market.

"Moreover, delay in stimulus by the government (market expectations) is also dampening the market sentiment. Among the global cues, concerns over US-China trade issue, political uncertainty in Hong Kong and minutes of the US Fed meeting showing that members were divided on the cut in interest rate, had an impact on the market. USD-INR spiked to 8-month high of nearly 72. There was all-round selling in the market," the note said.

Gaurav Ratnaparkhi, senior technical analyst, Sharekhan said, "Continuing with the bearish momentum from Wednesday's trade, the Nifty opened marginally negative & witnessed heightened selling pressure as the day progressed. On the way down, the index breached the August low of 10782."

According to him, the subsequent crucial level on the downside will be 10600, which is near the lower end of the consolidation that Nifty witnessed in January-February this year. The overall short-term target on the downside is at 10455, which is 78.6% retracement of the October-June rally.

Nagaraj Shetti, senior technical & derivative analyst, HDFC Securities, said the sharp decline witnessed in the market and the Nifty showed a deep cut. The short-term trend of Nifty continues to be negative. Next important supports to be watched at 10,550 levels, he said.