Indian equity markets fell sharply on Tuesday with Sensex falling almost 770 points, the first day the market opened after announcement of quarterly GDP data which showed that Indian economy grew by only five per cent in April-June quarter. Nifty also lost 225 points and closed below the crucial trendline support of 10,800 points.
While the BSE’s benchmark index closed at 36,562 points, the NSE’s Nifty closed at 10,797 points, both indices losing over two percentage points in a single day.
The sharp fall in the stock market was attributed to the investor panic over the lower-than-expected GDP growth rate.
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The only stocks that ended in the green were Tech Mahindra and HCL Technologies whereas those that fared the worst included Tata Steel, Ultratech Cement and ICICI Bank, which dropped 4.52 per cent, 4.35 per cent and 4.35 per cent respectively. They were followed by Titan (down 4.23 per cent), Indian Oil (4.12 per cent), and Tata Motors (down 4.03 per cent).
Dr. Joseph Thomas, Head of Research, Emkay Wealth Management, said the the sharp fall in the Q1 GDP growth to five per cent and the weak core sector growth were the key factors that caused a fall in the markets as it opened after a long weekend.
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“The continuing negative global cues, the raging tariff war between the US and China, and the likely sluggishness in the economic fortunes of economies around the world have also been behind the rot in the markets here as well as elsewhere. Weak domestic consumption especially rural consumption has resulted mainly from low employment levels and non-availability of finance, which are issues that call for immediate measures to salvage the situation,” he said.
Meanwhile, the market also reacted negatively to the Finance Minister’s announcement of merging 10 public sector banks into four banks with Nifty Bank index falling 2.2 per cent (over 603 points) and BSE Bankex falling 2.43 per cent (753 points). NSE’s Nifty PSU Bank index fell by 4.87 per cent.
All the other sectoral indices also closed in the red with metal sector shares dropping the most by 3.1 per cent.
Arun Thukral, MD and CEO, Axis Securities, said the markets had reacted to the weak auto sales data and lower than expected GDP growth number indicating that the slowdown was more pronounced. He said this demanded for policy measures on both monetary and fiscal side.
The recent measures taken by the Ministry of Finance would help mitigate the risk but more is expected to reverse the trend. Markets are already building in expectations of a rate cut over rest of the financial year with lumpy (around 30-40 bps) expected in October 2019 policy meeting… Given the all negative news flow doing round, one should take a contrarian call by investing in sound companies with growth potential which is now available at relatively attractive valuations in a staggered manner as Warren Buffet has time and again emphasized ‘to be greedy when the world around you is fearful’,” he said.
