Mumbai: India's Nifty 50 equity index wiped out gains made in 2019 so far, while the benchmark Sensex hit a fresh five-month low on Friday, tracking global peers that declined after US President Trump’s announcement of fresh tariffs escalated trade tensions with China.
Market value of BSE-listed companies eroded over ₹15 lakh crore since 5 July as disappointment over the Union Budget, tepid corporate earnings, weak auto sales, and the ongoing credit crunch have weighed on investor sentiment. Sensex and Nifty have fallen over 10% during this period.
So far this year, Nifty has lost 0.1%, while Sensex has risen 1%. Foreign investors have bought $9.60 billion while domestic institutional investors bought nearly ₹1.33 lakh crore in equities during this period.
At 10.30 am, the Sensex index was down 1% at 36,708.32 points, while the Nifty dropped 1.02% to 10,892.15 points. In the US, the Dow Jones and S&P 500 closed 1% lower each in overnight trade. Among Asian equities, Nikkei and Hang Seng were down 2.3% each.
"The major concern for the market is serious slowdown seen in various sectors that seemed cyclical at the start but are turning out to be structural in nature. To reverse the current slowdown we would need tough economic reforms," said Rusmik Oza, head of fundamental research, Kotak Securities.
In a surprise move, Trump on Thursday said he would impose 10% tariff on $300 billion worth of Chinese imports, effective 1 September, and could raise tariffs further if President Xi Jinping fails to move fast enough on striking a trade deal.
"This backdrop of a slowing economy and the low probability of any ‘big-bang’ stimulus events do not bode well for overall growth and earnings outlook. Nifty consensus EPS has been seeing cuts, with the downgrade momentum spreading across stocks. The Nifty companies results so far (two-thirds of the index weight) indicate Q1FY20 EPS growth of only 5% yoy. This contrasts with the steep 20-30% growth rates built into consensus expectations for FY20/FY21," said Emkay Research in a note to its investors.
"Despite the recent correction, we see Nifty valuations (17.5x one-year forward) not factoring in further earnings risks. Our cautious stance on the Nifty is reflected in ~4% cash position in our Nifty EAP. We like sectors that could benefit from continued govt spending and corporate re-leverage cycle (Corp banks and Cap goods), and defensives (IT services). On the other hand, we are underweight on discretionary (Auto) and Telecom (competition worries linger)," Emkay report added.
Shares of Bharti Airtel Ltd rose 3.2% to ₹334.30 after its average monthly revenue per user (Arpu) from India mobile services rose to ₹129 in the June quarter from ₹123 in the preceding three months. Airtel’s Arpu was the highest across telecom companies for the June quarter, with Jio’s at ₹122 and Vodafone Idea at ₹108.