Goldman Sachs downgrades domestic equities over elevated valuations, elections
Mumbai : The BSE benchmark Sensex on Monday crashed over 505 points to slip below the 38,000-level, snapping its two sessions of gains, as rupee woes and global trade war worries spooked investors despite the government announcing measures to stem a steep fall in the domestic currency.
The broader Nifty too nosedived over 137 points to end below the 11,400-mark.
A downgrade in global brokerage Goldman Sachs’ investment view on India also weighed on equities on Monday. Goldman Sachs, after four years, has reportedly downgraded its investment view on Indian equities to “marketweight” from “overweight” on concern over expensive valuations and deterioration in macroeconomic health.
“The risk reward for Indian equities is less favorable at current levels,” said Sunil Koul, analyst at Goldman Sachs. “We lower our investment view from ‘Overweight’ to ‘Marketweight’.”
Financials, led by HDFC twins HDFC and HDFC Bank, emerged as the biggest draggers of the session, pulling down the key indices from their key levels.
Subdued Asian and European markets due to escalating trade war between the US and China mainly led to a caution on domestic bourses. The government on Friday announced an array of steps, including removal of withholding tax on Masala bonds, relaxation for FPIs and curbs on non-essential imports to contain the widening CAD and check the rupee fall. The Indian currency once again breached the 72-mark to hit a low of 72.69 (intra-day) against the US dollar.
“The news of possibility of further escalation of trade war between the US and China didn’t go well with the markets. Also, weakness in rupee further dented the sentiment. Mostly sectoral indices traded in line with the benchmark index and closed lower. Markets are currently dancing to the global tunes and we do not see this changing any time soon…” an analyst said.
The BSE 30-share barometer, after a lower start at 38,027.81, quickly cracked the 38,000-mark to hit a low of 37,548.93 on across-the-board selling in recent gainers and finally settled 505.13 points, or 1.33 per cent, down at 37,585.51.
The market capitalisation (m-cap) of BSE-listed companies dropped Monday by over Rs 1,14,676 crore. The gauge had gained 677.51 points in the previous two sessions.
The NSE Nifty hit a low of 11,366.90 and finally ended 137.45 points, or 1.19 per cent, down at 11,377.75.
Meanwhile, on a net basis, foreign portfolio investors (FPIs) bought shares worth Rs 1,090.56 crore, while domestic institutional investors (DIIs) made purchases to the tune of Rs 115.14 crore on Friday, provisional data showed. In the banking space, prominent losers were HDFC Bank 1.81 per cent, SBI 1.65 per cent, Axis Bank 1.60 per cent, Yes Bank 1.39 per cent, ICICI Bank 0.82 per cent and Kotak Bank 0.61 per cent.
Higher crude oil prices in global markets too weighed on the sentiments here. International benchmark Brent rose 0.65 per cent to quote at $78.60 a barrel, while WTI crude was up 0.71 per cent at $69.48 a barrel.
Investor sentiment also hurt on reports that global financial services company Goldman Sachs said India’s world-beating stock market run is over.
Rupee breaches 72-mark again
MUMBAI: Breaking a strong two-day relief rally, the rupee plunged 67 paise to end at 72.51 against the US dollar after the government’s confidence building measures to curb the currency volatility fell short of expectations. It had closed at a one-week high of 71.84 in the last trading session.
Finance Minister Arun Jaitley on Monday blamed the depreciation of rupee to a combination of global factors, including trade war and internal policy decisions of the US. Jaitley said: “These are impact of significant global phenomena which are going on. You have at least three, if not more, indications globally coming of what are the nature of things that are happening.” He said the crude oil prices are increasing as there has been a squeeze on oil production which has upset the demand-supply ratio.
The government on Friday announced a slew of measures including a five-point plan to enhance foreign portfolio inflows and reduce imports with an aim to improve sentiments in the forex market.
But, it fell short of many investors’ expectations, causing heavy sell-off and the local stocks to take a massive plunge.
Reversing a brief recovery trend, the rupee opened with a sharp 66 paise fall to 72.50 against the US dollar at the inter-bank foreign exchange (forex) market.
It quickly extended losses to hit a session low of 72.70, forcing RBI intervention in the currency market.
The rupee enjoyed an exceptionally brisk pace of recovery momentum on the back of robust macro-economic data outcome amid talk of possible fiscal and monetary steps to stabilise the currency and comments from a government official that the slide was overdone.
It had managed to bounce back after the initial hardcore selling pressure, up 1.17 per cent in the two-day rally.
The local currency had hit a lifetime closing low of 72.69 against the US dollar and also touched an all-time intra day low of 72.92 last week.
Adding to pressure points, crude prices edged up from early losses despite assurances from Washington that Saudi Arabia, Russia and the United States can raise output fast enough to offset falling supplies from Iran and elsewhere.