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Investors lose over Rs 1 lakh crore on schizophrenic street today. Time to hedge!


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Markets are correcting as we predicted

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Investors lose over Rs 1 lakh crore on schizophrenic street today. Time to hedge!

  1. 1. 23/09/15 12:45 amInvestors lose over Rs 1 lakh crore on schizophrenic St. Page 1 of 2 Published on ( Investors lose over Rs 1 lakh crore on schizophrenic St. Sep 22 2015 Dalal Street came under sharp selling pressure yesterday after the European market opened weak, hit by Volkswagen's cheating on US emission norms. Sensex fell more than 2 per cent and finally closed 541.14 point down at 25,651, while Nifty also closed 2.07 per cent or 165.10 points down at 7,812. Future and options expiry scheduled for Thursday and the Reserve Bank of India’s monetary policy review meeting scheduled for next week also impacted sentiments. The sharp sell-off wiped out over Rs 1 lakh crore from total investor wealth, with market capitalisation of BSE-listed companies falling by Rs 1.36 lakh crore to Rs 93.33 lakh crore. On Tuesday, the Asian Development Bank (ADB) lowered growth projections for India for the current fiscal to 7.4 per cent from the 7.8 per cent earlier, citing weak monsoon, poor external demand and the government’s inability to push economic reforms in Parliament. Earlier in the day, all major Asian markets had closed with gains and things were looking fine for Dalal Street, though banking stocks witnessed minor selling pressure after a sharp upward movement. The trigger for the crash was pulled by selling in certain exchange traded funds soon after the European markets opened for trading. In a week when expiry of derivative contract is set to take place, any small selling leads to higher dent on stock prices and this seems to have been the case in yesterday’s trading. While the Asian markets are likely to open weak in reaction to the sentiments in the European and US markets, Dalal Street is likely to open with marginal weakness and remain volatile through the day as rollover to the October series occupies centrestage on the penultimate day of the closing of the September series contract. Markets in the UK, France and Germany plunged between 2 per cent and 3 per cent, affecting sentiments here. Foreign funds sold heavily turning net sellers to the tune of Rs 1,052.24 crore, while domestic buying remained muted with net purchases worth Rs 378.26 crore, which was insufficient to absorb the FPI selling pressure. A weaker rupee added to the poor sentiment, closing 65.88 to the dollar compared with previous close at 65.72. "The fall in the market is in line with what’s happening globally and has nothing to do with the domestic market. It’s only the risk of emerging market contagion that is leading to liquidation of stocks here. Even as we talk, the emerging market currencies are depreciating, leading to lot of worries,” said the head of equity research at a leading European Bank in India who did not want to be named. The broader market fared better, as BSE midcap index fell 1.57 per cent and BSE smallcap index fell 1.21 per cent outperforming both Sensex and Nifty. After a positive start to the day, Sensex and Nifty fell sharply as German automaker Volkswagen’s shares crashed by almost 34 per cent on two previous days of trading and nearly by another 20 per cent after the European markets opened on Tuesday, impacting major European indices, as major auto company stocks fell across Europe. "Global factors have resulted in the weakness in India. A lot investors are taking out money,"
  2. 2. 23/09/15 12:45 amInvestors lose over Rs 1 lakh crore on schizophrenic St. Page 2 of 2 said Kapil Khandelwal director Equnev Capital, a UK-based hedge fund. Volkswagen has been accused of rigging 11 million diesel cars to pass the US emission norms and could face up to $18 billion in fines in the US. Motherson Sumi Systems, an auto component supplier to Volkswagen fell 7.72 per cent as a fall out of Volkswagen’s suspending supplies of its diesel vehicles to USA. Rohan Korde, research analyst at Prabhudas Lilladher said, "Volkswagen’s admission of not complying with emission standards for some of its diesel models in the US poses a potential threat to the prospects for Motherson Sumi, if the fallout extends beyond North America. If the issue is contained there, then the impact is likely to be very limited. Volkswagen constitutes 12 per cent of Moterson Sumi Systems’s sales, most of which are to Europe. Mexico forms a small 1-1.2 per cent of the same." Dipen Shah, head of private client group research at Kotak Securities said, “Markets surprisingly fell in the latter half of the day, likely due to the weakness in European markets and caution ahead of the release of Chinese economic data tomorrow. There is also uncertainty over whether RBI would cut rates in the next bi-monthly policy review meeting on September 29." "Going ahead, after the RBI meeting the focus will shift to the quarterly results, which may remain lacklustre for the domestic-oriented sectors,” Shah added. Investors went short ahead of the China’s factory data due this morning, with metal stocks, particularly coming under selling pressure. The metals index on BSE was the top loser, falling 4.24 per cent. Interest rate sensitive stocks also witnessed profit booking ahead of RBI policy review, with BSE Bankex down 3.04 per cent, auto down 1.73 per cent and realty losing 2.54 per cent. The selling pressure was so fierce that not a single sectoral index on the BSE ended with gains. Other than interest rate sensitive, power was down 3.09 per cent, oil & gas (-1.27 per cent) were among the other major losers. Bank stocks too took a big hit as Amtek Auto’s total debt is around Rs 16,500 crore. The top losers among the banks were Yes Bank (4.64 per cent), Punjab National Bank (3.89 per cent), Axis Bank (3.57 per cent), ICICI Bank (3.13 per cent), Kotak Bank (3.09 per cent), SBI (2.96 per cent), HDFC Bank (2.38 per cent), IDBI Bank (3.67 per cent), Andhra Bank (3.51 per cent). The market breadth was highly negative with 1,738 stocks on BSE closing in the red compared with 944 stocks advancing and 114 stocks closing unchanged. © 2015 Financial Chronicle, All rights reserved Source URL: