Greece crisis, falling oil prices spook markets
MUMBAI: Fears about Greece exiting the Eurozone and a global stock market sell off perpetrated by a further slide in oil prices pulled the sensex down by 855 points on Tuesday – its biggest fall in over five years. Falling crude prices —which dipped to below the $50 per barrel mark for the first time since 2009 — also unnerved FIIs that aggravated the fall further, brokers and analysts said. The sensex closed at 26,987 and the session left investors poorer by Rs 2.76 lakhcrore (about $43.5 billion) with BSE’s market capitalization now at Rs 96.6lakhcrore.
The day’s trading started with the sensex opening about 150 points down, mainly because of Monday’s sell-off in the US markets on the back of dipping crude oil price, and soon the index was down over 600 points. After the news about Greece — that a party that has a higher chance of coming to power intends to take the country out of the Eurozone — hit the market, the sensex fell as much as 900 points and recovered just a tad to close 855 points (3.1%) lower. Market players said that if Greece exits the Euro it would be first such case and hence the global market will enter an unknown territory and hence the nervousness among investors around the world.
Compared to the stock market, in the bullion market gold prices inched up to Rs 27,320 per 10 grams, up by Rs 250 because of the yellow metal’s safe haven character among asset classes. Rupee on the other had closed flat at 63.39 to a dollar. The benchmark yield on 10-year gilts too closed nearly unchanged at 7.90% level.
In the stock market early on Monday, the sensex had briefly crossed the 28K mark in intra-day trades, at 28,065 and from that level in just two sessions the index has now lost about 1,000 points. Margin calls on speculators by their brokers also aggravated the fall in later hours of trade, brokers said.
“Markets came down sharply driven by a fall in crude prices and accentuated by margin triggers,” said Anup Bagchi, MD & CEO, ICICI Securities. “However, fundamental outlook remains optimistic and investors should continue to buy on dips to increase equity allocation,” Bagchi said.
One of the main reasons of the slide is attributed to FII selling with BSE data showing a net Rs 1,571 crore outflow on Tuesday while domestic funds were net buyers at Rs 1,190 crore.
A section of the broking community feels that the current slide was corrective in nature and the market will soon turn around. “The correction is nearly over and the market should start recovering soon. In case the US market stabilizes tonight, we will soon see a recovery in the domestic market,” said Sudip Bandyopadhaya, President, Destimoney Securities.
In Tuesday’s session, of the 30 sensex constituents, 29 closed in the red, with HUL as the lone gainer. Among the top losers were ONGC, down 5.9% at Rs 332, Sesa Sterlite, down 5.1% at Rs 209 and Tata Steel, down 4.9% at Rs 396.
For Wednesday’s session, brokers expect some more selling pressure early in the trade and thereafter it would depend on the global news flow. “Looking at the market data (net FII selling, net domestic buying and nearly unchanged open interest position in the derivatives segment which indicates still high speculative interest), there will be selling pressure in the morning,” said Arun Kejriwal, director, KRIS, an investment advisory firm. “Global trend will also influence the market trend.” Kejriwal said.
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