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Sensex tanks 306 points, Nifty below 11,350: 5 factors behind the selloff

Bajaj Finance topped the loserboard in the Sensex kitty of stocks, witnessing a 4 per cent slide.

, ETMarkets.com|
Updated: Jul 22, 2019, 04.24 PM IST
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Data suggests FPI outflows stood at Rs 7,712 crore in July.
NEW DELHI: Benchmark indices once again came under heavy selling pressure on Monday and extended their decline to the third consecutive session led by losses in index heavyweights HDFC duo, and banking and financial stocks.

Both Sensex and Nifty ended nearly 1 per cent lower. The indices had shed nearly 2 per cent in Friday's trade.

On the sectoral front, barring IT, telecom and auto, all sectors made losses, with finance being the top loser, down 2 per cent dragged by HDFC twins.

Top factors behind D-Street's fall:

> Heavy FII outflow
The super-rich in India are racking their brains to figure out ways to soften the blow from the stiff surcharge on income tax. Data suggests FPI outflows stood at Rs 7,712 crore in July. FPI buying in domestic market was on a fall since March when they infused Rs 33,980 crore in a single month. The government’s proposal to levy surcharge on high income tax brackets, that also include 40 per cent of FPIs investing in India, hurt the sentiment.

Finance minister Nirmala Sitharaman on Thursday stuck to her Budget proposal and declined to relent to demands by FPIs structured as trusts that they be exempted from the higher income-tax surcharge. She said they should adopt a corporate structure to avoid the levy. She said the government believed the richest should contribute more to society and nation-building.

> Weak cues from global markets
Asia stocks eased as investors reduced expectations of an aggressive US rate cut, while heightened West Asia tensions following an Iranian seizure of a British tanker lifted crude oil prices. MSCI's broadest index of Asia-Pacific shares outside Japan was down 0.1 per cent. South Korea's KOSPI shed 0.3 per cent, Australian stocks lost 0.2 per cent and Japan's Nikkei fell 0.5 per cent.

> Oil prices on a rise
Oil prices rose amid high tensions in the West Asia after a British tanker was seized by the Iranian military at the end of last week. Brent crude futures were up 51 cents, or 0.8 per cent, at $62.98 a barrel. The international benchmark rose to as high as $63.47 earlier. West Texas Intermediate (WTI) crude futures were up 15 cents, or 0.3 per cent, at $55.78.

> Technical indicators hint at further downside
The technical indicators on Dalal Street too signal more weakness. Mazhar Mohammad of Chartviewindia.in said the price action of last two sessions washed out the gains of the entire pullback rally from the lows of 11,461–707 range, which lasted six sessions. This kind of faster retracement on the downside clearly suggests that a fresh leg of the downswing is in progress.

The index on Friday slipped below its crucial support at 11,450 with ease, signalling a meek surrender by the bulls. The index, which last tested this level in May, could drift towards the 11,333-300 range in the coming sessions. Any gain towards the 11,500 level, meanwhile, is likely to be sold into, said analysts.

> Rupee weakens
The rupee too breathed bad. The domestic unit on Monday slipped 26 paise down at 69.06 against the US dollar on account of some buying in American currency by banks and importers amid sustained selling by foreign institutional investors. “Today, USDINR pair is expected to quote in the range of 68.65 and 69.05-69.20,” brokerage firm Motilal Oswal Financial Services said. The rupee on Friday snapped its three-day losing streak to close 16 paise higher at 68.81 against the US dollar.
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