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'Worst July in 17 years': Markets tank amid global cues

The stock market has been witnessing sell-offs by foreign institutional and portfolio investors (FIIs/FPIs) since finance minister Nirmala Sitharaman announced surcharge on the super-rich in the Union Budget on July 5.

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Domestic equity markets nosedived to a five-month low on Thursday on account of weak global and domestic cues, continuous sell-offs by foreign portfolio investors and mixed corporate earnings.

Key benchmark indices fell over 1.2% with BSE Sensex slipping below 37,000-level intraday and Nifty 50 taking a dip below 11,000-mark.

Investors' sentiments in domestic markets were dampened by the industrial growth data on Wednesday that showed growth of eight core industries dropped to 0.2% in June.

A rate cut of 25 basis points by US Federal Reserve couldn't enthuse the bulls hoping for the US central bank to announce an easing cycle.

The stock market has been witnessing sell-offs by foreign institutional and portfolio investors (FIIs/FPIs) since finance minister Nirmala Sitharaman announced surcharge on the super-rich in the Union Budget on July 5.

Dip In Indices

 BSE Sensex plunged 786.94 points intraday to 36,694.18, making some recovery to close 462.80 points lower at 37,018.32 
 Nifty 50 fell 237 points to touch 10,881 intraday, before closing 138 points lower at 10,980

Overseas investors snapped their five month buying trend in July as they withdrew Rs 13,885 crore from equities over the last month. On Thursday, FIIs sold Rs 1,056.55 crore in equity segment.

The stock market saw its worst performance in July in 17 years. While Sensex fell 5.55%, Nifty plunged 6.3% in July – the sharpest monthly decline since October last year.

July was not a good month for medium to small companies either, as BSE midcaps and smallcaps were down 8.37% and 11.16%, respectively.

Market watcherd say that in the last few days, only FPIs have been selling off, hurting the five crore small investors in the market who came through systematic investment plans (SIPs).

Auto companies also reported dismal numbers for July on Thursday, showing sharp negative growth across the board.

Rating firm Crisil has cut India's FY20 GDP growth estimate to 6.9% from 7.1% on the back of a weak monsoon, slowing global growth and sluggish high-frequency Q1 data. According to Crisil, the near-term onus on monetary policy is to stimulate Indian economy's growth.

Of the 30-stock Sensex, 23 stocks ended in red on Thursday, with the pack of losers led by Vedanta, Tata Motors, State Bank of India, Bharti Airtel, Yes Bank, and Infosys, witnessing losses up to 5.55%.

On the other hand, major gainers of the day were Maruti Suzuki, Power Grid Corporation, Reliance Industries, Bajaj Auto, Hero MotoCorp, Hindustan Unilever, and NTPC, gaining up to 1.86%.

Romesh Tiwari, head of research firm CapitalAim, said, "I expect some recovery or consolidation in markets tomorrow [Friday] that can be used by traders to unwind their long positions. In the absence of any new trigger, the market may follow the global market in the opening. If Nifty manages to trade above 11,070 in early trading tomorrow, than we may see it to move towards 11,200 on bounce back. Sentiments are quite negative after budget which have been augmented by poor earning reports of first quarter and slow monsoon. Traders should not initiate fresh longs at this level as the market is likely to continue with downtrend. Fresh shorts can be initiated around 11,200 levels with stop loss of 11,270 for a target of 10,850."

Deepak Jasani, head of retail research, HDFC Securities, said, "While the Nifty bounced back in the last 45 minutes of trade, the underlying short term trend remains down. Further downsides are likely once the immediate support of 10,881 is broken. Any pullback rallies could find resistance at 11,077-11,108 mark."

OPINION

It’s hurting brand India

FPIs come into a country based on a stable policy and trust in the government. The finance minister said she doesn’t want to go after FPIs. But FPIs are losing trust in India, as after they come in, tax rules are changed, and they are even told to change their status ‘to turn into a company’. Our reputation as a brand has been damaged by this.

TV Mohandas Pai, chairman, Manipal Global Education

 

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