Trade deficit spreads mayhem in markets

Mumbai : Stocks suffered their worst crash in several months as the benchmark Sensex tanked by a massive 430 points or 2.14%, its biggest fall in 14 months, to end at a one-week low after disappointing trade deficit raised worries about economic recovery.

Traders also attributed the sharp slump to profit-taking as Sensex had gained nearly 9 per cent since mid-April.

Trade deficit spreads mayhem in markets

This is the biggest fall since Sensex lost nearly 478 points on February 27, 2012.    Selling was seen across-the-spectrum as all 13 sectoral indices closed with losses in 0.94-3.17 per cent range with FMCG, financial, metal, auto and capital goods shares leading the laggards.

Sentiment took a big hit after the country’s April trade deficit surged to USD 17.8 billion on back of massive 138% spike in gold import amid concerns that the worsening current account deficit would offset easing inflationary pressure.

Dragged down by the massive selling, total investor wealth – measured by market capitalisation – slumped by a whopping Rs 1 lakh crore as nearly two stocks out of three ended with losses. Even a sharp dip in retail inflation, which dropped to 9.39 per cent in April, failed to lift the sentiment.

The broad-based Nifty nosedived to hit a low of 5,972.90 before closing at 5,980.45, showing a massive slide of 126.80 points, or 2.08 per cent, over the last close.

Lower-than-expected Q4 earnings from state-owned banks and worsening asset quality further dampened investor mood.

ITC topped the losers’ list with the stock crashing by over 5 per cent to Rs 335.85 on profit booking after rising by nearly 9% in the last five consecutive sessions. The market-cap of the company eroded by Rs 14,895 crore to Rs 2,65,383 crore.

Others top losers included L&T, TCS, ICICI Bank, Tata Motors, RIL and HDFC Bank. Bharti Airtel and Tata Steel fell by over 4 per cent each.

“Trade deficit number of close to USD 18bn for the month of April surprised negatively on the back of further increase in the import of Gold and Silver and feeble exports growth. It has dented hopes that CAD situation would significantly improve with the recent crash in prices of oil and precious metals,” said Amar Ambani, Head of Research IIFL.

Even gold came under heavy unwinding from stockists against the backdrop of ongoing sell-off in global markets. The yellow metal dropped the most by Rs 390 in Mumbai, while in Delhi it lost Rs 180 per 10 grams on Akshay Tritiya which is considered as auspicious day for buying the precious metals. In Chennai and Kolkata, the prices fell by Rs 200 and Rs 260 per 10 grams respectively. Driven by easy monetary policies among major central banks globally, Indian equities have rallied on hopes of higher FII inflows. Experts said that the wholesale price inflation data on Tuesday and political developments apart from key corporate earnings  would decide the future course of stocks.

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