Sensex skids 360 pts on China syndrome

Our Bureau Chennai | Updated on January 11, 2018



Fears over lofty equity market valuations seem to be catching up in India as the momentum in global markets stalls. The bullish equity sentiment also took a beating as the ‘Black Monday’ crash in Chinese small- and mid-cap stocks has put the focus back on that country’s ailing stock markets.

The Sensex and Nifty, the key domestic equity benchmarks, fell 1 per cent on Tuesday and closed at 31,710 and 9,827, respectively.

The fall, the largest this year, was triggered by a crash in tobacco major ITC and Reliance Industries. There could be a sharp reversal in trend if the fall extends any further, say experts.

“These are unusual times for the equity market,” said Raamdeo Agarwal, MD and Co-founder, Motilal Oswal Financial Services. “In terms of valuations, markets look stretched but any prediction is difficult.”

ITC fell 12.5 per cent to close at ₹284 — a level not seen since 2015 — after the government corrected a duty anomaly that could have yielded windfall profits to the company. Another cigarette maker, Godfrey Phillips India, slipped 10 per cent.

The RIL stock, too, took a beating after the company was asked to cough up huge sums due to an unfavourable arbitration award. The counter snapped its nine-day winning streak and fell 2.09 per cent to close at ₹1,519. “At around ₹1,530, RIL is at its top and any reversal in the stock could lead to the Sensex and Nifty changing their direction as it was a chief constituent of the bull run so far,” said Rohit Srivastava, Fund Manager, BNP Paribas Sharekhan.

China fall

Nearly 500 stocks on the small-cap index ChiNext, mostly tech firms, hit the 10 per cent lower limit on Monday, reviving memories of the 2015 crash in mainland stocks. The ripple effects continued on Tuesday.

“It is early to call a trend reversal yet,” said Rahul Arora, CEO, Institutional Equities, Nirmal Bang Securities. “Markets are definitely overvalued even in terms of forward earnings but the risk seems more from the global scenario than any domestic events. If the earnings do not catch up in India by next year, markets can see a severe crash.”

Published on July 18, 2017

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