Sensex falls 713 pts on poll results anxiety

A day before the state election results, stock markets witnessed a major plunge on Monday as investors turned anxious over the outcome, falling rupee and weak global cues.

In its worst-single-session fall since October 11, Sensex fell 713 points, or 2%, to close at 34959.72 on Monday while the broader Nifty plunged 205.25 points, or 1.92%, to settle at 10488.45.

The rupee tumbled 50 paise to close at 71.32 against the US dollar on worries over the global trade war front and uncertain crude prices. The unit dropped to 71.44 per dollar during the intra-day trade.

After the market hours on Monday, Reserve Bank of India (RBI) governor Urjit Patel resigned with immediate effect citing personal reasons. Investors said this would impact the market today and both the benchmarks may see some fall.

"Markets have already discounted a 3-0 whitewash. If even one state goes the BJP way, it will result in short covering. As far as the RBI governor's resignation is concerned, it alone has the ability to knock off 200 points from the Nifty," V K Sharma, head PCG and capital markets strategy at HDFC Securities said.

However, G Chokkalingam, founder and managing director of Equinomics and Research Advisory said, "RBI governor's resignation is not a big event. The government will find someone soon. There is no fundamental reason for the investors to worry."

All sectoral indices on the BSE and NSE ended in the red, led by realty, banking, metal, pharma, pharma and financial stocks.

Kotak Mahindra Bank, Reliance Industries, Adani Ports, Asian Paints and Tata Motors were the biggest laggards in the Sensex pack, falling as much as 6.56%.

BSE Sensex may see further sharp corrections, while Nifty may hover around 10,100-10,200 level if the elections outcome are in line with exit polls, according to analysts.

In a strategy report by Kotak Securities, it said the market could see "a modest rally or a sharp correction on and after December 11 depending on the outcome of the state elections in the critical states of Chhattisgarh, Madhya Pradesh and Rajasthan".

A K Prabhakar, head of research – IDBI Capital said that if election outcomes are in line with the exit poll, the market will react sharply.

"For Nifty, once 10430 breaks, then it will be either 10200-level or 10100-level," he said.

Kotak in its report said that if it is a 3-0 or 2-1 score for the BJP, it may result in a moderate market rally, subject to global developments with the market ascribing a higher probability of the BJP winning the national elections in April-May 2019.

However, a 0-3 or 1-2 score with BJP losing Madhya Pradesh and Rajasthan may result in a sharp market correction as the market will likely to take a dim view of the BJP's prospects in the next national elections given the large contribution of these three states to the BJP's 2014 win.

Meanwhile, the China-US trade disputes may linger for longer as the recent arrest of the CFO of Huawei may impede the efforts being made by China and the US to find amicable solutions for their longstanding trade disputes over the next few weeks.

Standard Chartered in its market report said among secondary barometers, the BSE Mid-Cap index and BSE Small-Cap index fell around 1.8% each. Both these indices outperformed the Sensex. The market breadth, indicating the overall health of the market, was weak.

WAIT AND WATCH

• The broader Nifty plunged 205.25 points, or 1.92%, to settle at 10488.45 on Monday.
   
• The rupee tumbled 50 paise to close at 71.32 against the US dollar on worries over the global trade war front and uncertain crude prices