NEW DELHI: Benchmark indices saw a sharp fall on Monday morning amid a rising dollar and US bond yields ahead of Fed’s annual Jackson Hole annual symposium, and at home, the expiry of monthly futures and options contracts.
Benchmark indices were trading in the overbought zone and analysts were expecting selling at highs. Besides, Asian markets were also largely mixed, offering little support to domestic stocks.
The 30-pack BSE Sensex tanked over 700 points or 1 per cent to trade below the 59,000 level. Nifty50, meanwhile, was trading 200 points lower near the 17,550 mark.
The BSE market capitalisation stood at Rs 275.61 lakh crore, down Rs 4.91 lakh crore in two sessions over Rs 280.52 lakh crore as of August 18.
Key factors behind market fall today:
- Firm dollar, US bond yields
The Dollar index now trades near the mid-July high supported by safe-haven buying amid increasing worries about the health of the European and Chinese economies and largely hawkish comments from Fed officials, analysts said.
On Monday, the dollar index was trading flat at the 108 level.
“The Dollar Index seems to have resumed its uptrend and as the equities generally have inverted correlation to the same; this would be an added concern for the market,” said Ruchit Jain, Lead Research, 5paisa.com.
On the other hand, US bond yields stood at 2.983 per cent against the 2.588 level as of August 1.
“The dollar index is back above 108 and the US 10-year bond yield is at 2.99 per cent. This is negative for capital flows to emerging markets,” said VK Vijayakumar, Chief Investment Strategist at
.
- Jackson Hole Symposium
One of the reasons why the dollar has strengthened of late is the hawkish stance by several US Fed policymakers ahead of the Jackson Hole Symposium on August 25-27.
The minutes of the July FOMC meeting suggest the Fed has started to acknowledge the risk of overtightening in order to restore price stability, indicating a subtle shift towards both inflation and growth sensitivity, said Nomura India.
“However, subsequent Fedspeak from Daly, George, Bullard, Kashkari and Barkin continued to focus primarily on the need to reduce elevated inflation through a series of additional rate increases and holding rates at a restrictive level for some time,” Nomura said.
- F&O expiry
Nifty futures open interest increased sharply over last week and open interest was the highest seen over in a month, Raj Deepak Singh, Analyst – F&O at ICICIdirect said in a weekly note.
While FPIs have liquidated some longs, retail participants increased their long positions, he said.
“We believe, strong hands have booked some profits after a strong move seen during the series in the anticipation of some consolidation,” Singh said in the weekly note, adding that any profit booking should be limited till 17,500 level in the settlement week.
“Friday’s decent correction has validated our stance of staying light at higher levels and now, the way our key indices snapped their 8-days winning streak (on Friday), it does not augur well for monthly expiry week. If we see some nervousness globally, we may see Nifty50 testing lower levels of 17,600 – 17,450,” said Sameet Chavan of Angel One said this morning.
- Mixed cues from Asia
Muted cues from Asia also weighed on the investor sentiment. Asian stock were mixed after China cut an interest rate that affects mortgage lending while investors await the annual Fed meeting in Jackson Hole, Wyoming, for rates guidance after minutes last week from the US central bank’s July board meeting affirmed plans for more increases despite signs of weaker economic activity, AP reported.
Kospi in South Korea gave up 0.7 per cent to 2,475.35 and Sydney’s S&P ASX-200 fell 0.8 per cent to 7,060.20. New Zealand and Singapore advanced while Indonesia declined. The Shanghai Composite Index rose 0.4 per cent to 3,270.59 while the Nikkei 225 in Tokyo sank 0.4 per cent to 28,805.52, AP reported. The Hang Seng in Hong Kong shed less than 0.1 per cent to 19,770.92.
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