Indian equities fall sharply on Hong Kong, Argentina turmoil

  • Auto stocks slumped after data from Society of Indian Automobile Manufacturers showed India's passenger vehicle sales in July fell 31%

Indian equity markets slumped over 1.7% on Tuesday tracking global markets which fell as turmoil in Hong Kong and Argentina spooked investors already on edge over the trade war.

The benchmark 30-share index Sensex fell 1.66% or 623.75 points to close at 36958.16 points, while 50-share Nifty Index slid 1.65% or 183.80 points to end at 10925.85 points.

Global markets, especially Hong Kong, fell as pro-democracy protesters brought the city’s airport to a standstill on Monday. Argentina’s peso as well as equities sank after voters rejected President Mauricio Macri in primary elections.

Back home, investors were disappointed after the government did not announce any measures to exempt foreign investors from the increase in surcharge on the super rich. Also, investors were cautious amid the sharp decline in vehicles sales in July and rising geopolitical tension following the situation in Jammu & Kashmir.

"Indian markets have been tagging-along global markets in palpable risk-off sentiment due to multiple challenges of intensification of US-China trade war, sell-off in Argentina and Hong Kong markets. Despite best day-in-a-decade performance by Reliance stock on the back of pro-investor statements in its AGM, couldn’t save the day for Indian markets", said Jagannadham Thunuguntla, senior vice-president and head of research (wealth), Centrum Broking Ltd.

"Sell-off is all pervasive across the sectors fuelled by less-than-inspiring Indian corporate results and weakening rupee. Market participants are eagerly awaiting pro-market measures by Indian government post their extensive consultations with various stakeholders over previous week," Thunuguntla added.

On Thursday and Friday, Sensex gained nearly 900 points on expectation of rollback of higher surcharge on foreign investors. However, Finance Minister Nirmala Sitharaman gave no such indication at a meeting with foreign portfolio investors on Friday.

The meeting, attended by key finance ministry representatives including tax officials, indicated the government is open to reviewing an unintended tax burden on them proposed in the union budget presented on 5 July after having steadfastly rejected their pleas for a review earlier. The increase in surcharge on the income tax outgo of certain classes of taxpayers earning above specified limits hit certain FPIs organised as trusts.

The move triggered massive selling in the stock market, wiping out over 15 trillion in market valuation. Foreign investors have net sold $3.31 billion of domestic stocks so far in the quarter through 8 August, data compiled by Bloomberg show.

Auto stocks slumped after data from Society of Indian Automobile Manufacturers showed India's passenger vehicle sales in July fell 31%, its steepest drop in two decades. Car sales fell 36% while truck and bus sales fell 26%. Shares of Mahindra & Mahindra Ltd declined 6.1%, Eicher Motors Ltd fell 5.3%, Maruti Suzuki India dropped 5.1%, Hero MotoCorp Ltd lost 2.5%, and Bajaj Auto dipped 1.5%.

Shares of Reliance Industries Ltd surged nearly 10% after the company announced selling 20% stake in its chemicals and refining operations to Saudi Aramco for $15 billion as part of its efforts to reduce debt.