Weak global cues, monsoon fears drag key indices down

Weak global cues on account of a major drubbing in Chinese shares and mounting concerns on monsoon deficiency dragged the domestic equity indices down. The 30-share Sensex (^BSESN : 16632.01 -222.92) of the Bombay Stock Exchange (BSE) declined 225.62 points, or 1.50%, at 14,809.64 points led mainly by oil and gas, metal and auto sector stocks. The broader 50-share Nifty (^NSEI : 4941.75 -63.8) of National Stock Exchange (NSE) closed at 4,394.10 points, losing 64.80 points, or 1.45%.

Sentiments in other key Asian markets remained weak following heavy selling in Chinese stock market that brought down Shanghai Composite by 4.30%. Markets were also concerned about a potential tightening of monetary policy in China that could impact the current pace of growth, which was mainly on the back of massive stimulus packages implemented by the Chinese government sparking a major sell-off in the Asia-Pacific region. As a result Japanese Nikkei closed down 0.79% while Hang Seng lost 1.40% on Wednesday.

"Globally, China is an issue," said Arup Misra, derivative analyst at Elara Capital. He said the reports of monetary tightening in China are coming when other central banks have maintained a status quo for the growth to pick up. "With commodity prices hardening, inflation will be key concern and any kind of monetary tightening would see out flow of money from the emerging markets."

In this background a deficient monsoon on the domestic front that could fuel inflation is further worrying the market participants. Additionally, experts also argue that with commodity prices going higher, earnings upgrade done on the basis of lower prices will have to be revised since the valuations don't justify the underlying fundamentals. According to the provisional figures available with stock exchanges, foreign institutional investors (FIIs) were net sellers of equity to the tune of Rs 622.06 crore. On the other hand the domestic institutional investors had bought net equity worth Rs 83.77 crore.

Market breadth a reflection of the broader sentiments of the market remained negative with 1,490 stocks in BSE ending the day in the red when compared to 1,134 stocks that had advanced.