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Sensex plunges nearly 500 pts, Nifty slips below 11,700; factors that weighed on D-Street

Reports of defaults and corporate mismanagements are keeping the market down.

ETMarkets.com|
Updated: Jun 17, 2019, 05.03 PM IST
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Concerns over higher valuations have dampened market sentiment in the past few sessions after another subdued quarter of earnings.
The domestic equity market continued to bleed on Monday on heavy selling in bank, auto and metals stocks amid weak global cues and concerns over poor progress in monsoon.

Dalal Street experts also blamed worries over liquidity in the system and cautiousness ahead of the Union Budget.

The BSE benchmark fell for a fourth straight day, ending 491 points or 1.25 per cent lower at 38,961. Its NSE counterpart Nifty settled at 11,672, down 151 points or 1.28 per cent.

“Other than weak global sentiment, the liquidity crisis in the NBFC sector and reports of defaults and corporate mismanagements are keeping the market down,” said Rajnath Yadav, Senior Research Analyst for Fundamental Research at Choice Broking.

Here are the key factors in details that weighed on the market today:

Weak progress in monsoon
According to the India Meteorological Department the overall monsoon deficiency in the country has reached 43 per cent due to its sluggish pace. IMD's central division — which covers Madhya Pradesh, Odisha, Chhattisgarh, Maharashtra and Goa — has recorded 59 per cent of rainfall deficiency while east and northeast India has recorded 47 per cent deficiency.


Jayant Manglik, President, Religare Broking said: “We expect volatility to continue next week as participants will be reacting to a list of events on both the domestic and global front. On the local front, investors will be closely watching the progress in monsoon and the GST council meeting scheduled on June 20.”

Higher valuations pinch
Concerns over higher valuations have dampened market sentiment in the past few sessions after another subdued quarter of earnings. At present, the benchmark BSE Sensex is hovering at price-to-earnings (P/E) ratio of 28 times, against an average of 21.80 times during the past five trading session.

“Valuation-wise, market is definitely not at comfortable levels,” said Rajnath Yadav.

Geopolitical tensions
Tensions between the US and China are spilling over into other countries as well. India on Sunday imposed higher customs duties on as many as 28 US products, including almonds, pulses and walnuts, in response to higher tariffs imposed by Washington on Indian products such as steel and aluminium.

The move will hurt American exporters of these 28 items, as they will have to pay higher duties, making those items costlier in the Indian market.

Fed rate cut bets get cold
The global stock markets had witnessed a decent rally on hopes of US Federal Reserve cutting rates in June meet. However, according to a Reuters report, the central bank is now expected to leave borrowing costs unchanged on Wednesday, but possibly lay the groundwork for a rate cut later this year.

Macro blues
Trade deficit remained elevated in May and widened to $5.36 billion from $15.33 billion in April and a comparable $14.62 billion the same month last year. The muted figures are highly attributable to mild revival in export growth, which remained subdued in the previous month, coupled with subsequent import growth which remained steady in May relative to its acceleration in April.

“The near-term outlook for trade looks fragile with President Donald Trump terminating a beneficial trade treatment accorded to India for a developing nation. The action adds further woes to India’s trade position, that is already struggling against the prevalent headwinds from slowing global demand,” said Centrum Broking in a note.

Market at a glance
In the 30-pack Sensex, 27 stocks ended in the deep pool of red while three remained flat. YES Bank with a gain of 0.74 per cent was the top gainer. Tata Steel, Vedanta, Tata Motors, Axis Bank, RIL and ONGC were among the top losers, shedding between 5.66 per cent and 2.52 per cent.

Among Nifty stocks, four advanced while 46 declined.

The midcap and smallcap indices moved in line with benchmark Sensex, slipping 1.29 per cent and 1.35 per cent, respectively.

Amid such a strong selloff, no sector was spared and all 19 indices ended with losses. BSE Metals index was the worst performer, down 3.05 per cent. Energy, basic materials, oil & gas and telecom were among other losers, declining over 2 per cent each. BSE IT with a fall of 0.25 per cent was the most resilient.
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