Sensex tanks 793 points; five factors that dragged the market

NEW DELHI: Benchmark equity indices opened weak on Monday, as Dalal Street continued to react to Budget fine prints even as stronger jobs data in the US dashed hopes of aggressive rate cuts by the US Fed and geopolitical tensions in West Asia triggered a spike in crude oil prices, driving the rupee lower.

Asian markets fell up to 2 per cent on fears that foreign inflows may ebb. For the domestic market, concerns over another fraud at PNB and proposed revision in minimum shareholding norms weighed on investor sentiment.

Money managers and heads of research at domestic brokerages in an ET poll said Nifty is likely to see limited upside or could possibly drift lower by Diwali.

Going by the buzz on Dalal Street, here is a list of five factors that seem to be dragging the market lower.

Budget proposals: A Budget proposal to increase minimum public shareholding of listed companies to 35 per cent from 25 per cent spooked market sentiment. Going by history, such a proposal will get implemented over a time frame of 1-2 years. It depends on how Sebi wants to implement the process and the stringency with which it seeks to enforce such a deadline, Edelweiss Securities noted. Besides, the Budget proposed a 20 per cent tax in case on buybacks, which may dry up share repurchases in the market. ET reported this morning that the hike of income-tax surcharge on high net worth individuals may hit some 2,000 overseas funds, as foreign portfolio investors in India are structured either as trusts or association of persons, or AOP.
US jobs data: Job growth in the world’s largest economy rebounded strongly in June, with government payrolls surging, the Labour Department’s closely watched employment report showed on Friday, suggesting May’s sharp slowdown in hiring was probably a one-off, Reuters reported. This has dashed hopes of aggressive rate cuts by the US Fed as was anticipated earlier. Employers added 224,000 jobs last month, the most in five months.

Selloff in Asia: US jobs data dragged Asian shares lower. The Shanghai Composite index was down 2.5 per cent at the time of writing of this copy. Hong Kong’s Hang Seng and South Korea’s KOSPI fell 1.8 per cent each. Japan’s Nikkei was down 1.01 per cent while Taiwan’s TAIEX traded 0.53 per cent lower. The sharp fall in Asian shares had a rub-off on Indian equities. Indian equity indices has tanked on Friday amid disappointment over Budget announcements.

Rupee, crude oil: US Jobs data dragged emerging markets currencies against dollar. South Korean won and Indonesian rupiah led the losers, falling half-a-per cent each against US dollar. The rupee fell 21 paise to 68.63 a dollar level. Meanwhile, Brent crude futures rose 10 cents, or 0.2 per cent, to trade $64.33 a barrel in early trade.

Earnings jitters: Investors turned cautious ahead of the June quarter earnings season, which kicks off on Tuesday. IT bellwethers TCS will announce its first quarter numbers on Tuesday, followed by Infosys on Friday. Analysts are not expecting big earnings surprises this quarter, except for sparks of profit growth in certain pockets.