Sensex, Nifty crash in intraday trade, but pick up by close
09 November 2016
India's key benchmark indices crashed in intra-day trade with concerns about the victory of Donald Trump in the US presidential elections coupled with a major government crackdown on India's cash economy with the demonetisation of 500 and 1,000 rupee notes, but recovered sharply in mid-afternoon trade.
The barometer S&P BSE Sensex, which had slipped below the 26,000 level at the start of trading session, ended 338.61 points or 1.23 per cent lower to settle at 27,252.53, ending above the psychologically important 27,000 mark. The National Stock Exchange's wider Nifty 50 index fell 111.55 points or 1.31 per cent to settle at 8,432, also ending above the psychologically important 8,000 mark after hitting an intraday low just a shade above that mark in morning trade.
The Sensex and the Nifty both settled at a four-month low on the government's black money crackdown and outcome of US presidential election. These concerns had triggered widespread selling in early trade. The Sensex had hit its lowest intraday level in more than five months in early trade. The Nifty had also hit its lowest intraday level in 4-1/2 months in early trade.
However, the market staged a sharp recovery in second half of the trading session after Republican Donald Trump was declared the 45th President of the United States.
The broad market depicted weakness. There were more than three losers against every gainer on BSE. 2,157 shares fell and 610 shares rose. A total of 97 shares were unchanged. The BSE Mid-Cap index fell 1.85 per cent, while the BSE Small-Cap index fell 2.66 per cent. The decline in both these indices was higher than the Sensex's decline in percentage terms.
The total turnover on BSE amounted to Rs5456.21 crore, higher than turnover of Rs3142.77 crore registered during the previous trading session.
Banks stocks tumbled after the government announced late on Tuesday that it was banning use of Rs500 and Rs1,000 notes in its fight against the corruption, fake currency and black money. Auto stocks also dropped across the board, as did IT industry shares.
Trump is known to be in favour of protectionist measures, such as stricter visa norms to curtail jobs for Indian and other non-US employees. Trump has made outsourcing and liberal immigration laws a major campaign issue in this election in an effort to protect American jobs. IT firms profit margins are expected to come under pressure if Trump tightens immigration laws and take harsh measures to discourage outsourcing. The US is the biggest outsourcing market for the Indian IT firms.
Real estate shares slumped after Prime Minister Narendra Modi announced the demonetisation of Rs500 and Rs1000 banknotes from the system effective 8 November 2016 midnight in a swift move to clamp down on black money and terror financing. The real estate sector, which is infamous for being the biggest receiver and hoarder of black money in the domestic economy, is likely to take a massive hit.