Policies undertaken at Mint Street by the RBI's MPC, seem to have impacted the joy at Dalal Street.
The Sensex is reeling under severe stress. In the trading session on Thursday, the Sensex got off to a single digit marginal gain during the pre-opening. Up to 10 AM, it seemed like a normal trading session, with marginal gains and losses.
By 11:00 AM, the heatmap turned into a bloody red stream of scrips. The Sensex was trading 0.57% towards the red or 212 points.
Benchmark heavyweights and marquee stocks such as Reliance Industries, ICICI Bank, Mahindra & Mahindra, HDFC, Yes Bank, have all turned red.
This movement is in stark contrast to the previous four trading sessions which saw the BSE Sensex scale levels of 37,700, a fresh high, and 11,000 for the Nifty 50.
The scene is almost similar on the NSE Nifty 50.
Sectoral indices such as Auto, Banks, Oil & Gas were reeling under stress. Healthcare scrips seemed to do favorably better.
Performance of Auto stocks, with data from NSE Nifty.
A greener Healthcare index. The S&P BSE Healthcare index had scaled 15028 on 25th January. Currently it is trading at 14563.83. A higher dollar is expected for many healthcare exporting firms.
Here are some reasons for the sudden change on the indices.
1. RBI MPC hikes rates: The decision has been quickly followed by a slip in Automotive and banking scrips. Hero Motocorp, Bajaj Auto, Ashok Leyland, Eicher Motors, Tata Motors, Mahindra & Mahindra are all trading in the red. Of these stocks, TVS Motors Bajaj Auto, Eicher, and Hero Motoco are already trading in the red for the past 30 days. This according to data made available from the NSE.
2. Trade Restrictions: US's proposal of a 25% trade tariff on $200 billion Chinese goods has caused a major flutter. Asian stocks are trading in the red. This has impacted equities as well as commodities markets. Shanghai Copper was down by 2%.
3. Forex Markets: Buoyed by RBI's repo rate hike and the US Federal reserve leaving rates unchanged, has added some strength to the Rupee. The Rupee hit a one month high, up by 17 paise against the dollar at 68.26. This although is a positive for the economy, latest depository data reveals a depressing stat- Foreign Portfolio Investors have sold equities worth Rs 95.94 crores.
4. Outflows: Domestic institutional investors have sucked out Rs 562.33 crores, held as equities according to latest data. This major sell-out is one of the biggest reasons for the Sensex to end its winning streak.
5. Crude Economy: Rising crude prices have forced most aviation companies in India to bleed into loses. Crude prices hovered range bound at $70-72 a barrel in the past fortnight. On Thursday, Reuters data showed, oil prices steadying after a two day loss. This was owing to an increase in US crude inventories. Brent crude futures were up by 40 cents or 0.6% at $72.79 a barrel, while US West Texas Intermediate (WTI) crude futures increased by 30 cents, or 0.4% to $67.96 a barrel.
6. Stress on Gold Buying: A World Gold Council report suggests that India's gold demand may be down by 8% at 187.2 tonnes during April-June period compared to second quarter of last year. This the council believes is driven majorly owing to higher local prices and seasonal buying nature of bullion. US spot market price was quoting Gold at $1218 per ounce, while MCX Gold marked a 0.13% gain at 29461.
On the equity side, major stocks related to Gold have had a mixed trend so far. Rajesh Exports was down by 1.20% at Rs 570.05; Tribhovandas Bhimji Zaveri was down 0.38% at Rs 78.70; PC Jewellers was up by 0.38% at Rs 91.55; Titan Company was up by 4.55 points at Rs 921.40.