Kashmir shock slams stocks
The Sensex on Monday touched a five-month low and the Nifty gave up all its gains of 2019 as investor sentiment was hit by the Centre’s move to abrogate Article 370 for Jammu & Kashmir. The political development came amid other headwinds such as the trade war between the US and China and poor corporate earnings.
In a surprise move, the central government proposed to abolish Article 370 that gave a special status to Jammu & Kashmir. The Centre moved a separate bill to bifurcate the state into two separate union territories — Jammu and Kashmir, and Ladakh. The step led to concerns that the political situation in the state could worsen.
Pakistan Prime Minister Imran Khan had on Sunday said that the situation in Kashmir had the potential to blow up into a regional crisis.
For the investor, the development comes at a time equities have fallen sharply over the past few weeks.
While foreign portfolio investors (FPIs) have been net sellers since the Budget decision to levy a higher surcharge on certain categories of investors, results from corporate India have been disappointing.
The economy, too, has not been showing any signs of emerging out of a slowdown.
The Sensex opened in the red at 36842.17 on trade tensions between the US and China and reports of restrictions being imposed in J&K. The index hit an intra-day low of 36416.79 — a fall of more than 700 points over Friday’s close. However, buying by domestic institutions saw the index recovering some lost ground to close at 36699.84, still down 418.38 points, or 1.13 per cent.
On the NSE, the 50-share Nifty plunged 134.75 points, or 1.23 per cent, to close at 10862.60 as 38 of its constituents declined. It has thus given up all the gains of 2019.
Provisional data from the bourses showed that domestic institutional investors were net buyers to the tune of Rs 1,800 crore whereas the foreign investors remained net sellers and sold more than Rs 2,000 crore of stocks.
“The markets resumed the downtrend on Monday as it corrected further. A bounceback in the afternoon session helped to curb the losses. The weakness came on the back of rising tensions in Jammu & Kashmir and weak global markets caused by intensifying trade tensions between the US and China.
“In the background of the new local trigger, some fence sitting FPIs may press the sell button... However, news that the finance ministry is planning to hold a number of meetings with officials from various sectors of the economy could raise some hopes of an early action to tackle the current situation in the markets,’’ Deepak Jasani, head of retail research at HDFC Securities, said.
The lower close also coincided with the six member Monetary Policy Committee commencing a three day meeting on Monday. While a 25-basis-point reduction in the repo has already been discounted by the market, brokers said the focus would be on the commentary of the RBI.
Experts feel the markets will remain volatile till some good news emerge on the FPI front or if the government takes some action to revive the sagging economy.