Bihar elections, slower manufacturing dents markets; Sensex down 220 points

A slowdown in manufacturing activity, uncertainty over Bihar election results and heightened chances of a US rate hike depressed a barometer index of the Indian equities during the late-afternoon trade session on Monday.

Furthermore, falling Asian markets on the back of weak Chinese factory data led the 30-scrip sensitive index (Sensex) of the S&P Bombay Stock Exchange (BSE) to shed 220 points or 0.82 percent.

The latest Nikkei India Manufacturing PMI (Purchasing Manufacturers Index) for the last month showed a contraction due to a slower increase in new orders. The PMI was at a 22-month low of 50.7 in October.

The wider 50-scrip Nifty of the National Stock Exchange (NSE) was trading in the red. It was lower by 50.50 points or 0.63 percent at 8,015.30 points.

The S&P BSE Sensex which opened at 26,641.69 points, was trading at 26,437.25 points (at 2.30 p.m.), down 219.58 points or 0.82 percent from the previous day's close at 26,656.83 points.

The Sensex has so far touched a high of 26,824.30 points and a low of 26,378.26 points in the intra-day trade.

Market observers' cited that the bearish PMI, heightened chances of a US rate hike coupled with falling Asian markets dented investors' sentiments here.

"The uncertainty over the Bihar election results is flaring volatility. The elections has made investors cautious. The results will show the current levels of popularity of the incumbent central government," Anand James, co-head, technical research desk with Geojit BNP Paribas Financial Services, told IANS.

"The fall in India's PMI data for October and heightened chances of a US rate hike too eroded investors' confidence here," James added.

The US Fed in its' FOMC meet held on October 27-28 signalled a possible rate hike in December.

Higher interest rates in the US are expected to lead away FPIs (Foreign Portfolio Investors) from emerging markets such as India.

Vaibhav Agrawal, vice president, research, Angel Broking, told IANS: "Markets continue to trade in the red after closing negative for five straight sessions last week."

"The weakness is led by negative Asian cues. Earnings growth outlook also continues to remain tepid. We expect some stock specific movements based on earnings, while the broader markets would remain in a narrow range reacting to global cues," Agrawal said.

The Asian markets were subdued by the weak Chinese manufacturing data -- Japan's Nikkei index was down by 2.10 percent, Hong Kong's Hang Seng index dropped by 1.19 percent and Shanghai Composite Index slipped by 1.66 percent.

China's PMI came in at 49.8 in October, unchanged from September, signalling a stagnation in manufacturing.