Correction nigh on St as Trump sparks turmoil

Dalal Street’s dream run of hitting newer highs was snapped on Thursday by a major rout in US markets.

The BSE Sensex fell 223.98 points, or 0.73%, to close at 30434.79 while Nifty slid 96.30 points, or 1.01% to close at 9429.45 on Thursday, following a largest single-day fall in US markets.

Investors turned sceptical about US President Donald Trump’s ability to focus on policy and sought safety in bonds, leading to global sell-off in equities.

Tata Motors was the biggest loser falling 2.55% followed by Bajaj Auto that dropped 1.94%. Dr Reddy’s, M&M, L&T, HUL, RIL, ONGC, Maruti Suzuki, State Bank of India, Bharti Airtel, ITC Ltd, Tata Steel, Wipro, TCS, Lupin, Sun Pharma and Asian Paints were other laggards on the Sensex.

Experts believe volatility is here to stay at least for the next couple of months.

While bulls are likely to bounce back on every consolidation since domestic factors like normal monsoon forecast, inflation data, among others are looking up, the market is in for a deep correction if the US political tumult lingers, analysts say.

“The market was anyways overdue for a correction since it has not seen any major correction since November. Nifty may find support at 9150 while another 2% correction is expected in Sensex, if conditions abroad continue to be bearish,” Deepak Jasani, head - retail research, HDFC Securities, told DNA Money.

On Wednesday, the Dow Jones Industrial Average plunged over 370 points while the 10-year Treasury yield sank 2.22% on Wednesday. The S&P 500 index fell 0.1% to 2400.67. The US markets, however, recovered in early Thursday trade.

Going ahead, experts said the market is likely to witness consolidation.

Indian equities will be majorly impacted if turbulence in the US political environment continued amid risks of the US President’s impeachment, they said.

A big reason for the rally in the Indian equities was hopes on Trump’s policies. Also, with a weakening rupee, the markets already run the risk of a pullout of funds by the foreign portfolio investors, experts said.

“Nifty will have support at 9200 in the days to come, and a month down the line the index’s fall to 8800 would not be surprising. On the other hand, Sensex is likely to recoil to 2800 on account of global turmoil,” said Sanjiv Bhasin, executive vice-president, IIFL.

European and Asian markets ended with losses tracking the rout in the US markets. Hong Kong’s Hang Seng fell 0.62%,

Japan’s Nikkei 1.32%, Shanghai Composite Index 0.46%, London’s FTSE 1.42% and Frankfurt’s Dax shed 1.04%.

The dollar weakened for a fifth day fortifying currencies of emerging markets where equities witnessed the longest rally since March.

...& ANALYSIS

• Investors turned sceptical about Donald Trump’s ability to focus on policy, and sought safety in bonds
   
• Tata Motors was the biggest loser followed by Bajaj Auto. Dr Reddy’s, M&M, L&T, too lost
   
• Indian market is in for a deep correction if the US political tumult lingers, despite positive factors locally