Sensex tanked 587 points down, Nifty ends below 7,800
US rate hike fears, falling China growth, slow GDP growth in India pull down Sensex
Mumbai: The equity markets plunged sharply on Tuesday amidst weakness in global stocks after a survey showed China’s manufacturing growth slowed at its fastest pace in the last three years and on the fear of Fed increasing its interest rate in September.
An unexpected fall in India’s GDP growth for the April-June quarter also weighed on investor sentiment. After opening the day on a negative note, the Sensex tanked 586.65 points or 2.23 per cent to end the session at 25,696.44 while the Nifty closed the day at 7,785.85, losing 185.45 points or 2.33 per cent.
Meanwhile, International Monetary Fund managing director Christine Lagarde, on Tuesday said that the global economic growth is likely to remain weaker than expected because of slower recovery in advanced economies and continuing slowdown in emerging economies. She has also highlighted the need to “be vigilant for spillovers” from China's stutters.
The latest bout of volatility was kicked off by losses on Wall Street, after comments by US Federal Reserve Vice-chairman Stanley Fischer appeared to keep alive chances of a US interest rate increase in September. China’s official Purcha-sing Managers’ Index (PMI) then compounded matters, falling to 49.7 in August from the previous month’s reading of 50.0, its weakest showing in three years and below the 50 mark that separates expansion from contraction.
“The problem is that we have these brief spells of optimism like we had last week when US GDP was revised up, but the overall theme is still the weakness in China and that is very hard to dispel from markets,” said Philip Marey, a strategist at Rabobank in the Netherlands.
“The manufacturing index still shows that the economy is in the process of seeking a bottom,” said Wu Kan, a Shanghai-based fund manager at JK Life Insurance. “The market is unlikely to pick up anytime soon.”
“Recent volatilities in global financial markets could weigh on the real economy, and a pessimistic outlook may become self-fulfilling,” said He Fan, chief economist at Caixin Insight Group.
A separate survey from Fan’s organisation had also shown the country’s services sector slowing. MSCI’s broadest index of Asia-Pacific shares excluding Japan lost 1.9 percent to extend the more than 10 percent it had lost in August. The Shanghai Composite Index fell 1.2 per cent, but the CSI300 index was almost flat.
The pain was felt elsewhere. Japan’s Nikkei had slumped 3.8 per cent after losing 8.2 per cent in August. Australian, Indonesian and Hong Kong stocks were all down by more than two per cent. Russia’s rouble was among the hardest-hit emerging market currencies as the price of oil fell. Gulf stocks and metals markets were hurt as well.
London Metal Exchange copper fell almost one per cent to $5,087.50 as markets reopened after a long holiday weekend. Nickel slid two per cent and aluminium skidded as well.
( Source : deccan chronicle/agencies )