Was Kashmir issue lone factor that triggered sell-off on D-Street?

Bourses already in undercurrent bearish mode owing to negative global cues

By Dasari Sreenivasa Rao for NewsMeter

Whether it’s a Black Day for Kashmiris or other non-BJP political parties, but definitely it’s a Black Monday for the bourses as BSE Sensex 418.38 points and NSE Nifty 134.75 points. Many believe that Prime Minister Narendra Modi-led NDA government’s decision to scrap Article 370, special provisions under Article 35A and bifurcation of Jammu & Kashmir (J&K) had impacted the investor sentiment.

It was only one of the several factors, which had already been affecting the market sentiment negatively, observe analysts. However, investors are expecting a rate cut by the RBI Monetary Policy Committee (MPC) as Indian economy has been slowing down during the past two years.

BSE Sensex tumbled 418.38 points or 1.76 per cent and NSE Nifty fell 134.75 points or 1.23 per cent on Monday.

BSE Sensex tumbled 418.38 points or 1.76 per cent and NSE Nifty fell 134.75 points or 1.23 per cent on Monday.

The market undertone sentiment was already slipped into bearish mode during the previous week much before any clue on J&K issue. Foreign Portfolio Investors (FPIs) have started withdrawing their investments from the Indian markets. Adding to this China vowed to respond to the US tariffs announced last week. This created tremors not only in India, but across the global financial markets. The trade war between the world’s two largest economies has hammered down the Chinese Yuan below the sensitive level of 7 per US dollar, which is 11-year low. Adding to this, drop in PMI for Chinese economy has further dampened the market sentiment.

Let’s take a look at the major factors that pulled the domestic bourses lower. Japan’s Tokyo stock exchange and Hong Kong exchange led the sell-off in Asian markets as Nikkei fell 2.6 per cent on increasing concerns over weakening Yuan and trade conflict between the US and China. HangSeng tumbled three per cent owing to civil unrest. However, China's Shanghai Composite index fell marginally by 0.8 per cent, while South Korea’s Kospi fell 2.41 per cent.

Analysts hold the view that the rising tension over the US-China trade war has triggered the sell-off in the other currencies in Asia-Pacific region. Falling Yuan may give trade advantage to Chinese exporters.

On the other hand, Indian currency rupee breached 70 market against the US dollar as the home currency fell 80 paise.

The continuous outflows of foreign funds were further increased. The outflows of FPIs were Rs15,000 crore in July. On Friday alone, FPIs sold to the tune of Rs2,888 crore as against Rs2,812-cr buying support of DIIs.The market opening was lower as negative global cues and Kashmir issue were looming over the bourses. Investors were expecting that the government might intervene to arrest the fall, but nothing was announced during the day.

At 9.45am, the Nifty was trading 175.50 points or 1.60 per cent lower at 10,821.85. Nifty opened 98 points lower at 10,895.80 as against Friday’s close of 10,997.35 points. The super-rich tax continued to impact the FPIs as it caused one of the worst ever outflow of foreign funds