Upcoming F&O expiry drives volatility; Sensex down 318 points

Mumbai, Aug 26 (IANS) Uncertainty over the Chinese markets, profit bookings and the upcoming derivatives expiry flared up volatility in the Indian equity markets — leading to a barometer index shedding 318 points on Wednesday.

The barometer 30-scrip sensitive index (Sensex) of the Bombay Stock Exchange (BSE), which opened at 26,063.27 points, closed at 25,714.66 points — down 317.72 points or 1.22 percent from its previous close at 26,032.38 points.

The Sensex touched a high of 26,156.61 points and a low of 25,657.56 points during intra-day trade.

Bearish sentiments also subdued trade at the National Stock Exchange (NSE). The broader 50-scrip CNX Nifty of the NSE closed lower at 7,791.85 points, with losses of 88.85 points, or 1.13 percent.

Notwithstanding, the current slide in the Indian markets, India’s attractiveness has increased owing to the turmoil in global stock exchanges, Sunil Singhania, chief investment officer, equity, Reliance Mutual Fund asserted.

“Volatility is part and parcel to investing but it’s not a negative thing as it is generally perceived. It provides right opportunity to build positions in otherwise great companies,” Singhania said.

“Indian macros have never been better; oil at $43 and falling further, current and fiscal deficit trending lower, subsidy burden falling, inflation at multi-year lows and a falling interest rate environment.”

Aashish Somaiyaa, chief executive of Motilal Oswal AMC had a similar view that any extraneous development which gives an opportunity to enter India’s long-term secular bull market should be lapped up.

“The market fall has been due to global macroeconomic concerns but when the dust settles India is most likely to stand out as an investment opportunity,” Somaiyaa said.

On the trends in the day’s trade, analysts point out that the investor sentiments were subdued due to the uncertainty over the Chinese markets and the upcoming futures and options (F&O) expiry on Thursday.

“The markets are volatile. There is uncertainty over the next move of the Chinese government to stabilise their markets. Prices have risen and the investors are in a fix to chase them given the global uncertainties at hand,” Anand James, co-head, technical research, Geojit BNP Paribas, told IANS.

“The derivatives expiry tomorrow is also adding volatility and anxiety. Though a scheduled event, at this stage it is one of the most important factors to look out for.”

Another factor flaring uncertainty is the China interest rate cut administered by the People’s Bank of China (PBOC) inter-policy decision on Tuesday.

The news might have propped-up the currency markets a bit, however its final impact on yuan and thereafter the Indian rupee can be counter-productive.

“Unlike a rate cut in large consuming markets which increases funds inflows, monetary easing in a producing country like China will put in more pressure on yuan. Any devaluation in yuan will negatively impact the rupee,”

The yuan has fallen by 4.6 percent till now since August 11.

The rate easing in China coupled-with a stalled domestic reforms process has greatly damaged the investors morale in the Indian markets.

Sector-wise, out of the 12 BSE sub-indices only power and metal managed to remain in the green.

The S&P BSE banking index plunged by 331.35 points, the healthcare index plummet by 198.20 points, capital goods index receded by 147.88 points, the automobile index declined by 124.04 points and the information technology (IT) index fell by 105.14 points.

On the other hand, the S&P BSE power index gained by 29.54 points and metal index was up 16.37 points.

Major Sensex gainers in Wednesday’s trade were: BHEL, up 3.45 percent at Rs.240.20; Tata Motors, up 2.31 percent at Rs.336.80; Bajaj Auto, up 1.79 percent at Rs.2,244.15; Wipro, up 1.46 percent at Rs.549.75; and Coal India, up 1.22 percent at Rs.358.20.

The major Sensex losers were: HDFC, down 3.77 percent at Rs.1,102.45; Hero MotoCorp, down 3.45 percent at Rs.2,391.95; Mahindra and Mahindra, down 3.07 percent at Rs.1,215.30; State Bank of India (SBI), down 3 percent at Rs.245.80; and Bharti Airtel, down 2.57 percent at Rs.339.75.

Among the Asian markets, Japan’s Nikkei gained by 3.20 percent. However, China’s Shanghai Composite Index lost 1.30 percent and Hong Kong’s Hang Seng dropped by 1.52 percent.

In Europe, London’s FTSE 100 index slipped by 0.30 percent, French CAC 40 tumbled by 0.42 percent and Germany’s DAX Index fell by 0.48 percent at close of trading here.

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