Last updated on June 30, 2016

Chinese Economy Contributing to Slump in India’s Commodities Markets

The latest commodity news in Hindi is that bellwether indices in India’s equity markets closed out last week at a 15-month low. Money Bhaskar has the most up-to-date news about how Chinese economy and slumping commodity prices are giving economists reason to worry.

China is in the middle of a significant economic crisis, and financial experts are predicting that further devaluation of the yuan will have a negative effect on India’s exchanges and commodities.

China is in the middle of a significant economic crisis, and financial experts are predicting that further devaluation Share on X

Exchanges Finished Significantly Lower At Week’s End

In the week ending January 15, 2016 both the Bombay Stock Exchange (BSE), and the S&P Sensex finished down significantly.

Most concerning was the dip in the S&P Sensex, which finished the week down 479.29 total points for a loss of 1.92 percent. Further, the Nifty of the National Stock Exchange (NSE) finished the week down 163.55 total points for a loss of 2.15 percent. Both indices fell in four of the five trading days, causing lows that have not been seen in almost two years.

Vaibhav Agarwal, vice president and research head at Angel Broking, told the Business Standard, “The New Year continued to be negative for the markets in its second week as concerns over a global slowdown sparked by a fall in crude prices and negative macro data from China spooked markets.”

A similar opinion was echoed by Gaurav Jain, director, with Hem Securities. Jain elaborated that a slump across commodities worldwide, especially crude oil and a sharp sell-off in global equities in line with Chinese markets depressed Indian markets.

Specific to India, banking stocks were hardest hit, followed by metals, pharmaceuticals, and automobiles. Energy and fast-moving consumer goods (FMCG) closed out the week flat.

The New Year continued to be negative for the markets in its second week... ~Vaibhav Agarwal Share on X

Weak Rupee Causes Investors to Sell

A weak rupee is responsible for a recent spate of investor sell-offs, particularly by  Foreign Portfolio Investors (FPI). Last week, the rupee weakened by 96 paise to 67.60 (January 15) to a US dollar from its previous close of 66.64 to a dollar (January 8). National Securities Depository Limited (NSDL) figures showed that the FPIs were net sellers during the week ended January 15 2016. They divested Rs.3, 458.33 crore or $368.3 million in the equity and debt markets from January 11-15. Moreover, stock exchange data showed that FPIs sold stocks worth Rs.4, 281.89 crore during the past week.

A weak rupee is responsible for a recent spate of investor sell-offs, particularly by Foreign Portfolio Investors-FPI Share on X

Manufacturing Rebound Should Help

India’s industrial production was down in November 2015 during the festive month of Diwali, and that contraction is thought to have been a contribution to stock sell-offs and a lower rupee.

In the new year, analysts are predicting that once manufacturing is back up to speed, things will improve slightly, but all eyes remain focused on China, where further volatility will have a negative effect on not only India’s economy, but on the economies of the world’s leading industrialized nations. Keep an eye on the latest commodity news to follow this developing story and see how these effects on both India and worldwide economies play out.

Keep an eye on the latest commodity news to follow click here Share on X

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Post by Contributing Editor Mathews V P

Picture Credit: Getty Images