Trade war fears and other factors that led to Sensex's 300-point fall
, ETMarkets.com|
Updated: Mar 05, 2018, 04.08 PM IST
NEW DELHI: Stock benchmarks had a shaky start on Monday morning, lining up with the global weakness set off by US President Donald Trump's threat to impose trade tariffs on steel and aluminium.
The 30-share Sensex closed the day 300 points, or 0.88 per cent, down at 33,747, while the Nifty50 index wound up Monday's session 100 points, or 0.95 per cent, down at 10,359.
The fact is the faultlines are running deeper and it's just not about the trade war fears. Here are the top five factors that dragged the market down on Monday:
Trump's war of words: With 95,000 'likes' so far, US President Donald Trump's recent tweet on "easy to win" trade wars might have gone down well with the US twitterati, but it has set off alarm bells in stock markets the world over. Trump's talks of imposing hefty duties on imported aluminium and steel may not be good news for trading partners, which have warned the US of reciprocating duties, triggering worries of full-fledged trade confrontation. Global indices were down up to 2.5 per cent on Friday, the day the domestic market was shut on account of Holi. A similar play was all that was expected.
In a series of tweets, Trump said the US has lost $800 billion in yearly trade deficit because of its “very stupid” trade deals and policies. US's jobs and wealth, he said, are being given to other countries that have taken advantage of it for years. "They laugh at what fools our leaders have been. No more!" he said.
European election: "Heard there are polls in Italy", so went BJP chief Amit Shah’s jibe at Congress President Rahul Gandhi last weekend, who is in Italy these days with his grandmother. But Italy has really been at the centrestage in the euro region after exit polls suggested that the voting held in the country on Sunday could produce a hung Parliament. According to Reuters, the anti-establishment 5-Star is likely to be the largest single party by a wide margin, with 29.5-32.5 per cent of the vote for the lower house, according to the exit poll. A prolonged political stalemate could make heavily indebted Italy the focus of market concern in Europe.
Technical signals not supportive: Brokerage Sharekhan noted that the index has made a negative close on the weekly basis and the recent pullback on the Nifty50 looked done at the swing high of 10,631. "On the hourly chart, the Nifty broke the lower end of a reverse rising channel. Overall, the set-up looks ripe for next leg down to start off, which can test the recent low of 10,276 and can eventually target 10,070 in the short term," it said.
Nervousness ahead of Budget Session: The second leg of the Budget Session of Parliament is slated to commence today. The multi-crore PNB bank fraud and the Rotomac issue are set to rock the proceedings.
North-East election outcome not enough: Brokerage Nomura India noted that Prime Minister Narendra Modi’s BJP has historically not held much ground in the North-East, but these results suggest that this is starting to change as a focus on development and nifty coalition building saw it perform much better. As such, these election results will be a sentiment booster for the BJP.
"However, the North-East states are quite small, they account for just one seat each in the Rajya Sabha (Upper House), and given the BJP’s low initial seat tally in these states, the scope for upside was larger. They are also not necessarily representative of the overall public mood. Upcoming and bigger state elections – in Karnataka (April/May) and Chhattisgarh, Madhya Pradesh and Rajasthan (November/December) – will be more important as they will largely be two-way fights between the BJP and the INC," the brokerage said.
The 30-share Sensex closed the day 300 points, or 0.88 per cent, down at 33,747, while the Nifty50 index wound up Monday's session 100 points, or 0.95 per cent, down at 10,359.
The fact is the faultlines are running deeper and it's just not about the trade war fears. Here are the top five factors that dragged the market down on Monday:
Trump's war of words: With 95,000 'likes' so far, US President Donald Trump's recent tweet on "easy to win" trade wars might have gone down well with the US twitterati, but it has set off alarm bells in stock markets the world over. Trump's talks of imposing hefty duties on imported aluminium and steel may not be good news for trading partners, which have warned the US of reciprocating duties, triggering worries of full-fledged trade confrontation. Global indices were down up to 2.5 per cent on Friday, the day the domestic market was shut on account of Holi. A similar play was all that was expected.
When a country (USA) is losing many billions of dollars on trade with virtually every country it does business with, trade wars are good, and easy to win. Example, when we are down $100 billion with a certain country and they get cute, don’t trade anymore-we win big. It’s easy!
— Donald J. Trump (@realDonaldTrump) March 2, 2018
In a series of tweets, Trump said the US has lost $800 billion in yearly trade deficit because of its “very stupid” trade deals and policies. US's jobs and wealth, he said, are being given to other countries that have taken advantage of it for years. "They laugh at what fools our leaders have been. No more!" he said.
The United States has an $800 Billion Dollar Yearly Trade Deficit because of our “very stupid” trade deals and policies. Our jobs and wealth are being given to other countries that have taken advantage of us for years. They laugh at what fools our leaders have been. No more!
— Donald J. Trump (@realDonaldTrump) March 3, 2018
European election: "Heard there are polls in Italy", so went BJP chief Amit Shah’s jibe at Congress President Rahul Gandhi last weekend, who is in Italy these days with his grandmother. But Italy has really been at the centrestage in the euro region after exit polls suggested that the voting held in the country on Sunday could produce a hung Parliament. According to Reuters, the anti-establishment 5-Star is likely to be the largest single party by a wide margin, with 29.5-32.5 per cent of the vote for the lower house, according to the exit poll. A prolonged political stalemate could make heavily indebted Italy the focus of market concern in Europe.
Technical signals not supportive: Brokerage Sharekhan noted that the index has made a negative close on the weekly basis and the recent pullback on the Nifty50 looked done at the swing high of 10,631. "On the hourly chart, the Nifty broke the lower end of a reverse rising channel. Overall, the set-up looks ripe for next leg down to start off, which can test the recent low of 10,276 and can eventually target 10,070 in the short term," it said.
Nervousness ahead of Budget Session: The second leg of the Budget Session of Parliament is slated to commence today. The multi-crore PNB bank fraud and the Rotomac issue are set to rock the proceedings.
North-East election outcome not enough: Brokerage Nomura India noted that Prime Minister Narendra Modi’s BJP has historically not held much ground in the North-East, but these results suggest that this is starting to change as a focus on development and nifty coalition building saw it perform much better. As such, these election results will be a sentiment booster for the BJP.
"However, the North-East states are quite small, they account for just one seat each in the Rajya Sabha (Upper House), and given the BJP’s low initial seat tally in these states, the scope for upside was larger. They are also not necessarily representative of the overall public mood. Upcoming and bigger state elections – in Karnataka (April/May) and Chhattisgarh, Madhya Pradesh and Rajasthan (November/December) – will be more important as they will largely be two-way fights between the BJP and the INC," the brokerage said.
