Sensex at 6-month lows, Nifty surrenders 8,100—mark

Market benchmark Sensex fell over 71 points in choppy trade today to hit about six-month low of 26,228, falling for the fourth straight session, amid lingering worries about the economic impact of demonetisation.

The Nifty too dipped below the key 8,100—level.

Sentiment also took a hit on sustained foreign capital outflow from emerging markets, including India, and the dollar climbing to its highest mark in over 13 years.

Trading sentiment remained distinctly weak due to cash crunch arising out of the government’s move to demonetise Rs 500 and Rs 1,000 notes to flush out black money amid concerns about its impact on small and medium—sized businesses which largely run on cash.

After opening a shade higher at 26,304.90, the Sensex advanced to the day’s high of 26,449.87, largely on bargain—buying by participants, including sustained pumping of funds by domestic financial institutions.

However, it turned volatile largely in tandem with overseas markets and slipped into negative terrain to hit a low of 26,155.40 before settling 71.07 points, or 0.27 per cent, lower at 26,227.62, a level last seen on May 25, 2016. The Sensex had lost 1,218.99 points in the previous three sessions.

The Nifty, after shuttling between 8,151.25 and 8,060.30, concluded 31.65 points or 0.39 per cent down at 8,079.95, a level last seen on May 26, 2016, when it closed at 8,069.65.

Tech and telecom stocks bore the brunt of selling. Power was the notable gainer among the BSE sectoral indices.

Egineering company Bharat Heavy Electricals Ltd rose as much as 1.4 percent after HSBC Global Research raised its rating on the stock to “buy” from “reduce".

Among the losers, some auto and two-wheeler makers, which are expected to see reduced demand for their products because of the banknote measures, fell with Hero MotoCorp declining 1.25 per cent.

Top gainers on the Nifty : Tata Motors (3.7%), Hindalco (3.5%), Power Grid (2.15%) and GAIL (1.59%).

Top Nifty losers : Ambuja Cements, Bharti Airtel, ZEE Enterprises, TCS and ACC.

Brokers said continued purchases by domestic financial institutions and value—buying by retail investors in recently battered stocks influenced sentiments. They said, however, sustained capital outflows by foreign funds restricted the gains.

“Overall, the general market sentiment is down as investors remain wary and we can see some discretionary spending taking place due to demonetisation,” said Saurabh Jain, assistant vice-president of research at SMC Global Securities.

“A lot of mixed reaction can be expected from sector-based stocks as we get a clearer picture on who would gain from this (withdrawal of bank notes) move and who would be impacted. While gains on the indexes right now will be short term, one can expect selling to resume soon.”

European markets

European equities edged higher on Thursday as basic resources stocks bounced back, while South African financial services group Investec climbed to a six-month high after reporting a jump in half-year profits.

The pan-European STOXX 600 was up 0.2 per cent by 0942 GMT after opening lower. The index is still down around 7 per cent so far this year.

Investors also awaited US Federal Reserve Chair Janet Yellen's congressional testimony at 1500 GMT for cues on the economic outlook and rate increases.

“Despite the remarkable sell-off in the US bond markets and the rising inflation expectations, Janet Yellen is expected to sound cautious and to refrain from giving too much credit to recent turbulences in the financial markets,” Ipek Ozkardeskaya, analyst at London Capital Group, said.

“This is the major downside risk in the US and global equity markets today.”

Asian markets

Hong Kong's benchmark Hang Seng Index edged lower on Thursday, with continued strength in the US dollar hurting sentiment in Asia, but the decline was limited by strength in the services sector. The benchmark Hang Seng index fell 0.1 per cent, to 22,262.88, while the China Enterprises Index lost 0.4 per cent, to 9,326.54 points.

Japanese stocks ended marginally higher as stocks were bought after the central bank's first fixed-rate debt purchasing operation weakened the yen. The Nikkei ended flat at 17,862.63 in choppy trade, while the Topix rose 0.1 percent to 1,423.08. The JPX-Nikkei Index 400 also gained 0.1 percent, to 12,786.58.