Sensex Ends 491 Points Lower; Metal and Energy Stocks Witness Selling

Mon, 17 Jun Closing

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After opening the day marginally lower, share markets in India witnessed negative trading activity throughout the day and ended deep in the red.

All sectoral indices ended on a negative note, with stocks in the metal sector, oil & gas sector and telecom sector, leading the losses.

At the closing bell, the BSE Sensex stood lower by 491 points (down 1.3%) and the NSE Nifty closed down by 151 points (down 1.3%). The BSE Mid Cap index ended the day down 1.3%, while the BSE Small Cap index ended the day down by 1.4%.

Asian stock markets finished on a positive note. As of the most recent closing prices, the Hang Seng was up by 0.4% and the Shanghai Composite stood higher by 0.2%.

In the news from macroeconomic space, most of the selling pressure in Indian stock markets today was seen as India slapped higher tariffs on certain US products in retaliation to Washington's decision to remove certain trade privileges for New Delhi.

The above move will hurt American exporters of the listed 28 items as the importers will have to pay duties on these products. Accordingly, they might reduce the import.

As per a report, India would get about US$ 217 million additional revenue from such imports.

Higher Indian tariffs on US goods could impact growing political and security ties between the two nations and escalate trade war fears.

Apart from the above, losses were also seen ahead of the Federal Open Market Committee (FOMC) meeting this week and the slowdown in foreign institutional investment (FII) into Indian markets.

For the US policy meet, the two-day meeting will start from June 18 and market participants are expecting that the US Fed may become dovish in its policy stance.

On the FII part, data suggested that FII have turned net sellers in June in the cash market.

Note that FIIs have been mostly net buyers in Indian markets so far in 2019. A slowdown in liquidity from FIIs will keep domestic market trade on a volatile note.

Speaking of FOMC and FII, note that the bullishness that we witnessed in the markets from March until mid-April was driven by renewed foreign investor flows into Indian equities. And one of the key reasons this money poured into India, including other emerging markets, was the shift in monetary policy stance by the US Federal Reserve.

Here's what Ankit Shah wrote about this in one of the editions of The 5 Minute WrapUp...

• The US central bank, until some months ago, was on track to hike interest rates and shrink the Fed balance sheet. But seeing signs of slowdown in the economy and the nervousness in the stock markets, it showed its willingness to turn dovish.
  
  So, it's unlikely we'll see any interest rate hikes by the US Federal Reserve in 2019.
  
  In fact, my reading suggests that the Fed may resume its easy money policies if the global economic slowdown persists and the markets gets jittery.
  
  One of the key triggers for the ongoing market correction is the escalation in the US-China trade war amid increasing fears of a global slowdown.

The chart below shows how foreign money moved in and out of India over the last three months owing to the evolving global events:

Foreign Investors Turn Sellers in May 2019

Meanwhile, in times like these, hold on to your safe stocks and don't go looking for overvalued stocks. Maintaining your calm when everyone is losing theirs will help you build long-term wealth.

In the news from aviation sector, Jet Airways share price was in focus today. The stock of the carrier witnessed selling pressure and plunged to its fresh all-time low in today's session ahead of its lenders' meet today.

The lenders of Jet Airways are meeting today to finalise how a resolution will be possible under the June 7 Reserve Bank of India (RBI) mandate on stressed assets.

Besides, the lenders are meeting to figure out whether rescue of the carrier is still possible, or it will have to be taken to the bankruptcy court.

Note that Jet Airways has a debt of nearly Rs 85 billion on its books with total liabilities of around Rs 250 billion.

Also, several people from the top management have left the airline company in the past few months. Lenders to the cash-strapped airline, led by the State Bank of India (SBI), are seeking investors to recover their dues.

The airline, if in any case, is admitted to the National Company Law Tribunal, under bankruptcy resolution, lenders may recover only a fraction of the Rs 84 billion the airline owes them.

How this pans out remains to be seen. Meanwhile, we will keep you updated on all the developments form this space.

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