North Korea jitters and 4 other factors that pulled Sensex by over 300 points




On the weekly chart, Nifty had formed a small body doji star, which was indicating a pause in the upward journey. NSEBSETata MotorsLoading data…

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                    ChartsValuation & Peer ComparisonCommunity BuzzPEER COMPANIESKotak BankInfosysICICI bankHindustan UniLeverHDFC bankAxis BankEXPAND TO VIEW ALL Domestic stock market took a major hit on Monday, tracking bearish sentiment in global markets, on North Korea’s sixth nuclear test of a hydrogen bomb on Sunday and threats or more future launches.

                    South Korea’s Defence Ministry on Monday said it was seeing signs that North Korea planned to stage more ballistic missile launches, possibly including an intercontinental ballistic missile.

                    Reacting to the news, BSE Sensex cracked nearly 300 points to 31,621.08 while Nifty50 was trading 93 points or 0.94 per cent down at 9,880 at around 12.30 pm (IST).

                    All sectoral indices were trading in the red with most indices trading 1 per cent lower. Nifty Realty was the top loser on the index, plunging 2.76 per cent to 279.70.

                    In forex market, the rupee was down 9 paise at 64.11, whereas gold futures were up over 1 per cent at Rs 30,216.

                    Here are the five key factors behind the market’s major fall on Monday:

                    Geo-political tensions
                    North Korea’s sixth nuclear test on Sunday and latest reports suggesting that South Korea on Monday fired missiles to simulate an attack on the North’s main nuclear test site hit global market sentiment.

                    Asian markets were down on investor jitters and raised fears about risks to regional stability with domestic indices extending losses and falling as much as one percent in early trade.

                    Japan’s Nikkei slipped 0.9 per cent at 19,508.25, while South Korea’s Kospi fell 1.1 per cent to 2,332.01. Hong Kong’s Hang Seng lost 0.8 per cent to 27,736.67, while the Shanghai Composite remained little changed, adding 0.1 per cent to 3,371.77.

                    Meanwhile, in the US, Defense Secretary Jim Mattis said that the US will answer any threat from the North with a “massive military response, a response both effective and overwhelming.”

                    The Dow Jones futures were trading half a per cent down at the time of writing this report.

                    Profit booking
                    Heavy selling in IT, auto and financial sectors further dragged indices lower with index heavyweights Infosys, HDFC Bank, Kotak Bank, Larsen & Toubro, HDFC, ICICI Bank, Hindustan Unilever, Axis Bank, Adani Ports and Tata Motors contributing over 200 points to the drop.

                    BSE IT was trading 1.20 per cent down while BSE Bankex and BSE Auto were trading 0.94 per cent and 0.85 per cent down respectively. Meanwhile, BSE Realty was the top sectoral loser, down 2.30 per cent. Healthcare index extended losses with BSE Healthcare trading 1.25 per cent lower at 13,222.62.

                    “Small Cap index which captures the mood of retail public is forming an ending diagonal pattern which is a powerful trend reversal pattern, whenever it breaks on the downside the fall will be sharp and swift. Although long term trend is still bullish but market is ripe for correction as the internal breath is weakening. Short term traders may book profits at current levels or trail the position at 9750,” said Jimeet Modi, CEO at SAMCO Securities.

                    Techincal charts
                    On the weekly chart, Nifty had formed a small body doji star, which was indicating a pause in the upward journey. Analysts were advising investors to book profits.

                    “Looking at the weekly chart, we continue to mention that the market has slipped into consolidation mode with a short term perspective and hence, traders should ideally avoid trading aggressively in such moves,” Angel Broking said on Monday morning.

                    FIIs turn sellers
                    Foreign portfolio investors (FPI) in August stood net sellers in domestic equity markets for the first time since January 2017. Overseas investors sold shares worth Rs 14,293 crore in August, according to the data available with NSDL, signalling weakening of India’s attractiveness as India with 19 per cent gains remained among top emerging markets in local currency terms, despite less-than-expected growth in earnings.

                    “For CY17 YTD, MSCI EM (up 26 per cent), India-Sensex (up 19 per cent), Brazil (up 18 per cent), Korea (up 17 per cent) and Taiwan (up 14 per cent) were the best performers among the key global markets in local currency terms. Russia (down 12 per cent) has underperformed significantly. Over the last 12 months, MSCI EM (up 22 per cent) has outperformed MSCI India (up 11 per cent), said Motilal Oswal in a report.”

                    Weak Q1 earnings
                    Brokerage Motilal Oswal noted that June quarter earnings season marked another quarter of weak performance and a subdued start to FY18, impacted by GST-related destocking.

                    “We have cut our Nifty EPS estimate for FY18 by 2.6 per cent to Rs 484, and maintain our FY19E Nifty EPS at Rs 602. We are now building in 14 per cent EPS growth for the Nifty for FY18E,” the brokerage said.




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