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Indian shares slump on Trump win, Modi's banknotes measures

MUMBAI (NewsRise) - Indian shares tumbled to four-month lows Wednesday, as Donald Trump's unexpected U.S. presidential election win sparked a global market selloff, while New Delhi's abrupt withdrawal of large denomination banknotes rattled investors at home.

The benchmark BSE Sensex slipped 1.2% to 27,252.53 points Wednesday, its lowest since July 8, while the broader NSE Nifty50 index ended 1.3% lower at 8,432 points. The Sensex had fallen over 6% earlier, but buying in large cap pharmaceutical stocks and State Bank of India helped the index recoup some losses.

Information technology stocks, automakers and consumer goods manufacturers led losses on the Sensex, while pharmaceutical stocks were among the handful of gainers.

Global risk appetite took a major hit Wednesday as Republican Donald Trump surprisingly beat Democrat Hillary Clinton in the race to become the forty-fifth president of the United States. Polls leading up to elections had indicated a tight race, but remained largely in favor of Clinton.

Investors, worried about a period of prolonged policy unpredictability, and uncertain global economic and trade outlook, fled to safety as a Trump victory became apparent. Top-rated sovereign debt, the Japanese yen and gold surged, while stocks, currencies and commodity prices plummeted.

Asian markets fell Wednesday, with Hong Kong's Hang Seng and Japan's Nikkei 225 index declining 2.2% and 5.4%. South Korea's KOSPI and China's Shanghai Composite lost 2.3% and 0.6%.

On the Sensex, 20 of the 30 constituents ended lower Wednesday, while overall declining issues outnumbered advancing ones 2,157 to 610 and 97 closed unchanged.

"People fear Trump could hurt sectors such as IT because of his focus on generating employment in the U.S. But he can be the silver lining in a dark cloud because Hillary would have maintained status quo," said Akash Jain, vice president of research at Ajcon Global. "As for domestic economy, Modi's move may prove a boon for Indian economy in the medium to long term. It is a bold step and there is a chance ratings agencies may look to re-rate our economy."

Information technology companies, which rely heavily on exports and have large exposures to U.S. markets, lost favor with investors after Trump's victory. The Republican candidate has been vocal about cutting back on outsourcing jobs and has warned of levying a tax on companies that outsource work to companies outside the U.S.

The BSE information technology index fell 3.3%, marking its largest single session decline since July.

Tata Consultancy Services fell 4.9% to 2,171.05 rupees, while Infosys dropped for the first time in four sessions, sliding 2.7% to multi-month lows of 955.85 rupees. Rival Wipro slipped 1.3% to 447.20 rupees Wednesday.

The Indian federal government's move Tuesday to withdraw 500 and 1,000 rupee banknotes from circulation in a bid to curb black money also weighed on domestic investor sentiment.

"The impacts could be different depending upon sectors - deflationary in some while contractionary in others. This is a short-term risk for the economy which we would be tracking closely," Citi Bank said in an investor note today.

Automakers fell amid concerns of diminished discretionary spending following New Delhi's move.

The nation's largest carmaker Maruti Suzuki India fell 4.7% to 5,396.70 rupees, while Mahindra & Mahindra ended 3.4% lower at 1,337.15 rupees and Tata Motors slipped 1.1% to 534.40 rupees.

Two-wheeler makers Hero MotoCorp and Bajaj Auto fell 4% to 3,235.70 rupees and 2.9% to 2,781.60 rupees.

Shares of Indian real estate firms such as Godrej Properties, DLF and Oberoi Realty posted sharp losses amid fears a cash crunch will hurt prices.

Godrej Properties fell 2.5% to 349.45 rupees, DLF tumbled 17.5% to 118.55 rupees, while Oberoi fell 10.2% to 303.75 rupees.

Mortgage lender Housing Development Finance Corp slipped 2.9% to 1,349.10 rupees.

Consumer goods majors ITC and Hindustan Unilever ended 2.8% lower at 248.65 rupees and 1.8% down at 827.50 rupees.

State-run lenders, however, rose Wednesday. Ajcon Global's Jain said deposits in public sector banks sparked by the Modi government's move will help strengthen their positions.

The nation's largest lender State Bank of India rose 2.9% to 260 rupees, while state-owned Punjab National Bank rose 1.3% to 1142.45 rupees and Bank of Baroda ended 1.4% to 151.15 rupees.

Healthcare stocks, which had fallen considerably in recent sessions, rose on defensive buying.

Dr. Reddy's Laboratories ended 5% higher at 3,271.70 rupees, Sun Pharmaceutical Industries rose 4.1% to 661.10 rupees and Lupin advanced 1.3% to 1,529.05 rupees. Lupin reported a smaller-than-expected rise in second-quarter profit, as research and development expenses rose.

"Pharma stocks jumped on the assumption that the new regime in U.S. may be less disruptive," said Anand James, Chief Market Strategist, Geojit BNP Paribas Financial Services.

Cipla fell 1.5% to 528.10 rupees ahead of its quarterly earnings due later Wednesday.

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