Five factors that sent Sensex 600 pts tumbling

NEW DELHI: Friday’s rebound proved short-lived as benchmark indices resumed downtrend on Monday, with the BSE Sensex falling over 500 points and the NSE Nifty slipping below the psychological mark of 10,850.Monday’s selloff is to an extent a reaction to the selloff in Asian markets, more so after weak Chinese PMI reading and trade war concerns sent Chinese yuan below a politically sensitive 7 a dollar level. The recent comments by the US Fed have already made emerging markets jittery. On top of this, reports of a cabinet meeting at PM residence over Kashmir also weighed on the sentiment. Meanwhile, earnings are nothing to write about. Here are key factors weighing in on the market:Yuan at 11-year low: China’s yuan tumbled more than 1 per cent on Monday to 11-year low on mounting fears over a sharp escalation in the US-China trade war, sparking a sell-off in other currencies in the region, Reuters reported. It does not look like China is trying to use a weaker yuan to counter US trade pressure. The yuan’s fall seems to be stemming from panic selling, an analyst told Reuters. Rupee, meanwhile, breached the 70-mark by depreciating over 80 paise against the dollar. A fall in rupee hurts foreign inflows.Asia selloff: Asian shares took a beating with Hong Kong and Japan markets leading the fall. While Hong Kong market fell 3 per cent partly on civil unrest, Japan’s Nikkei declined 2.6 per cent on concerns that a weak yuan and ongoing trade tensions between US and China will hurt exports. South Korea’s Kospi declined 2.41 per cent, China’s Shanghai Composite index was down 0.8 per cent. Cabinet meet on Kashmir: A media report by India Today suggests Prime Minister Narendra Modi will be holding a crucial Cabinet meeting at his 7, Lok Kalyan Marg residence this morning as tension continues to simmer in Jammu and Kashmir over a looming uncertainty. The government has imposed restrictions under Section 144 of the CrPC in Srinagar district that came into effect on Sunday midnight, the report noted. Earning downgrades: Nifty consensus EPS has been seeing cuts, with the downgrade momentum spreading across stocks. The Nifty company results so far (two-thirds of the index weight) indicate Q1FY20 EPS growth of only 5 per cent YoY, said Emkay Global in a note.“This contrasts with the steep 20-30 per cent growth rates built into consensus expectations for FY20/FY21. Despite the recent correction, we see Nifty valuations (17.5 times one-year forward) not factoring in further earnings risks. Our cautious stance on the Nifty is reflected in 4 per cent cash position in our Nifty EAP,” the brokerage said. Foreign outflows: Mutual funds equity buying is proving insufficient these days, as FPI outflow have intensified. On Friday, FPIs were sellers of domestic stocks to the tune of Rs 2,888 crore against Rs 2,812 crore DII inflows.More than Rs 15,000 crore of selling by FPIs in July wiped out two-third of the gains made from the lows in this calendar year. This is despite DIIs net buying of Rs 18,000 crore seen during the month, Kotak Securities said in a note. "There were no big bang reforms or any major stimulus in the Union Budget. On the contrary, increase in surcharge and proposal to raise public shareholding has dampened investor sentiment and led to a sharp correction post Budget,” the brokerage said. 70529835

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