Stock market ends five-day winning streak
At close, Sensex was down 609.28 points, or 0.82%, at 73,730.16. Meanwhile, Nifty opened higher at 22,620.40 and touched a low of 22,419.90 in intraday trades.
Stocks have a strange way of making investors sit up and take notice. Public sector companies, in which the government controls all decision making and a majority of the equity, have saved the market some blushes as they are the only ones trading close to previous highs after the recent demonetization drive pummelled stock prices.
The Nifty PSE index, comprising of 20 super sized PSUs, was the top gainer, up 1.2 per cent to 3,731 points in late morning deals on Wednesday. This index is just a shade lower that its previous high of 3,779 points, stuck, ironically, 2 days after demonetization that was announced on November 8. In contrast, the 51-share benchmark Nifty has plunged 5.2 per cent and is trading flat.
Stock prices have taking an across the board beating after last month’s surprise government move to withdraw the legal tender status of the 1,000-rupee and 500 rupee notes that make up of 86 per cent currency float. Prime Minister Narendra Modi’s move to curtail black money flows into the economy has instead resulted in stalled factories, inventory pile ups, a substantial fall in demand and massive lines in front of banks where these notes have to be deposited back. All these events have also resulted in foreign institutional investors pressing sales on Indian equities.
In contrast PSU companies such as oil explorer ONGC, electricity producer NTPC, defence equipment supplier Bharat Electronics and Engineers India are maharatna giants and are enjoying fresh investor interest. It is no surprise then that 9 PSU companies in the 20-share Nifty PSE Index, are trading within 2 per cent of their 52-week highs as investors seek the relative safety of sound balance sheets backed by the government. These companies control vast swathes of the Indian economy. They enjoy near constant demand for their products and services and their income streams are more or less unaffected by the current economic turmoil.
Meanwhile, National Aluminium surged 8.5 per cent to Rs.67. Indian Oil Corp gained 2.9 per cent to Rs.304. Engineers India rose 2.5 per cent to Rs.301.35 and Steel Authority of India was up 2 per cent to Rs.51.30.
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