There was selling across the board, especially among metals, after news broke that China too had imposed import tariffs on 128 US goods.
Dragged by escalating trade tensions among global economies, the Indian market on Friday witnessed a gap-down opening, with the Nifty cracking the 10,000-mark.
There was selling across the board, especially among metals, after news broke that China too had imposed import tariffs on 128 US goods.
As such, the Indian market has been on a consolidation mode since the start of the year, led by factors such as LTCG imposition, liquidity issues, rising bond yields and volatile global markets.
On Friday, the Sensex was down over 400 points, while the Nifty managed to stay breach 10,000 and was trading in the four-digit range. The Nifty metal index is down around 3 percent, led by cuts in Hindalco, Vedanta and Tata Steel.
Meanwhile, midcaps witnessed selling pressure as well, with the Nifty Midcap was down nearly 2 percent. The Nifty had managed to breach 10,000 in the pre-opening trade as well.
Moneycontrol tells you five key reasons why the market is falling today.
Trade war fears escalate
The Street could be spooked largely on the back of escalating of trade wars between US and China. This, after China on Friday announced new tariffs on US goods. The US had earlier this month said that it will be imposing import tariffs on steel and aluminum, a move largely seen as a precursor to this decision.
The country’s commerce ministry proposed a list of 128 US products as potential retaliation targets, according to a statement on its website.
The US goods, which had an import value of USD 3 billion in 2017, include wine, fresh fruit, dried fruit and nuts, steel pipes, modified ethanol, and ginseng, the ministry said. Those products could see a 15 percent duty, while a 25 percent tariff could be imposed on US pork and recycled aluminium goods, according to the statement.
Fed rate hike
The market could also continuing to react to the interest rate hike announced by the US central bank on Thursday. It implies an improvement in the US economy and a possible redirection of fund flows from emerging markets to developed economies.
The US central bank approved the widely expected quarter-point hike that puts the new benchmark funds rate at a target of 1.5 percent to 1.75 percent. It was the sixth rate hike since the policymaking Federal Open Market Committee began raising rates off near-zero in December 2015.
The funds rate is closely tied to consumer interest rates, which generally rise as soon as the Fed moves.
Along with the increase came another upgrade in the Fed's economic forecast, and a hint that the path of rate hikes could be more aggressive. The market currently expects three hikes for 2018, and that remained the baseline forecast, but at least one more increase was added in the following two years.
Rising Crude Oil prices
A surge in crude oil prices could have impacted the market sentiment here. Higher crude prices imply increase in import costs for India as well as higher fuel expenses as well.
Oil prices jumped more than 1 percent on Friday, pushed up by Saudi plans for OPEC and Russian-led production curbs introduced in 2017 to be extended into 2019 in order to tighten the market.
The rise in oil prices defied global stock markets, which slumped on the back of worries about a trade stand-off between the United States and China. But gold, seen as a safehaven in times of economic turmoil, rallied to a two-week high on Friday.
The driver for crude futures was a statement by Saudi Arabian Energy Minister Khalid al-Falih, who said on Thursday that OPEC members will need to continue coordinating with Russia and other non-OPEC oil-producing countries on supply curbs in 2019 to reduce global oil inventories.
The Organization of the Petroleum Exporting Countries (OPEC), of which Saudi Arabia is the de-facto leader, as well as a group of non-OPEC countries led by Russia, struck an agreement in January 2017 to remove 1.8 million barrels per day (bpd) from markets to end oversupply.
Bank Fraud
Following Punjab National Bank scam, which involved fraudulent transactions to the tune of over Rs 13,000 crore, a new scam has hit, involving Union Bank of India.
The Central Bureau of Investigation (CBI) has registered a case based on a complaint filed by Union Bank of India against Hyderabad-based Totem Infrastructure, alleging it was cheated to the tune of Rs 303.84 crore by the company.
The complaint mentions promoters and directors Tottempudi Salalith and Tottempudi Kavita as the accused in the case. The company allegedly took a loan from a consortium of 8 banks, of which UBI was the lead bank.
The total dues outstanding for the consortium is Rs 1,394.43 crore. The account became a non performing asset (NPA) on June 30, 2012 after a default on the loan and interest payments.
Technical factors
So far, the index had witnessed selling pressure in three out of four days when the index rose above 10200 levels. Hence, for bulls to regain control, 10,200 is crucial for the bulls.
However, if there is a downside from the current 10,100-odd levels and a fall from those levels could lead to a touching of fresh lows.
The intensity of selling pressure shall get accelerated on a close below 10049 levels which may open up more downsides for the index. Hence, at this juncture it looks prudent for traders to remain sidelines and just wait for appropriate clues before initiating the trade.
Till it holds 10,000 mark decisively, bounce back from lower levels cannot be ruled out.
MORE WILL UPDATE SOON!!
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