Indian markets opened low on Wednesday mirroring global cues which saw Asian markets coming off two-month highs due to weak government data from China and also a reversal in oil prices, indicating a slowing in global trade.
At 10:30 AM, the 30-share Sensex was trading 150 points down at 24,509 points or a fall of 0.58% from the previous close, while the much wider Nifty on the NSE was trading 37 points down or by 0.5% at 7,448 points.
“US stocks were lower after the close on Tuesday, as losses in the oil and gas, basic materials and financials sectors led shares lower,” said a report by Nirmal Bang Securities. “A late selloff with the energy sector tumbling alongside the price of oil and after soft Chinese trade data rekindled fears that the global economy is weaker than anticipated. Asian stocks dropped for a second day as oil retreated after worsening economic data from China renewed concern over the outlook for global growth,” the report added.
In early trade, on the BSE, the losers on the sensex were led by metals major Tata Steel, which was down 2.5% reflecting extreme volatility in iron ore prices. Banking major SBI too was down 2.2%, while private mortgage major HDFC saw a steep fall of 2.1%.
The fall in iron ore prices and the weak commodities prices are a reflection of the slowdown in China, the world’s largest consumer of commodities. Recently, Moody’s had downgraded mining major Vedanta. According to Moody’s vice president Kaustubh Chaubal, the downgrade of Vedanta’s ratings is driven by the “low commodity price environment that will keep earnings improvement distant and a slower correction in leverage metrics than initially anticipated.”
Slowing economic growth rates in China materially impact the demand for base metals and prices globally.
The reversal in oil prices contributed to the decline in stocks as it reaffirmed investors’ fears that China and the world economy is still not out of the woods. Oil which had touched above $40 last week, saw a fall of 3% on Tuesday on higher stockpiles and the Brent index reflected a fall to about $39.65 a barrel.