Contagion fear grips global markets over China’s debt crisis – Times of India

MUMBAI: Indian markets closed sharply lower on Monday with the sensex down 525 points at 58,491, weighed by a global selloff that had its origins in a loan default by China’s largest real estate developer Evergrande, in which investors from across the world hold bonds. Analysts said that even the second-largest real estate company in China is in trouble with mounting debt, and the joint impact of the two entities now threatens the already fragile global recovery.
On Monday, trading on Dalal Street started on a weak note with the sensex down nearly 400 points. It recovered and was in the green by noon. But after that, it lost ground steadily to close nearly 1% lower. The day’s 525-point loss in the index was the biggest single-session drop in two months, BSE data showed.
On the NSE, the Nifty too traversed a similar trajectory and closed 188 points lower at 17,397. Commodity and metal stocks were the worst hit. The day’s slide on the BSE left investors poorer by Rs 3.4 lakh crore with its market capitalisation now at Rs 257.7 lakh crore, official data showed.

According to a report by the US-based investment management major Invesco, Evergrande’s liabilities are around 6.5% of the total Chinese property market’s liabilities and about 9% of the total Chinese offshore bond market financing. “Since the company is currently considered the bellwether for the property market and also a gauge of investor’s risk appetite for the broader offshore market, it’s fair to assume that there could be some systemic risk to the market if the ordeal is left unmitigated,” it said in a report published on Monday.
Coming within two years of the Covid-pandemic led panic selling that was witnessed in early 2020, investors are taking a cautious stance and offloading their positions in case the debt crisis in China engulfs the global market. As a result, in mid-session in the US, the Dow Jones index was down over 2%, while the Nasdaq was 2.6% lower. Crude oil too had slipped by over 2% and copper futures (December delivery) in Chicago was down nearly 3%. Back home, the slide in the sensex was led by HDFC and HDFC Bank, along with Tata Steel. These three stocks together accounted for more than 60% of the day’s loss in the sensex, BSE data showed. On the other hand, buying in FMCG stocks, along with Reliance Industries, cushioned the fall to some extent. Brokers also pointed out that while domestic funds were aggressive sellers with a net outflow of Rs 1,627 crore, foreign investors were still net buyers at Rs 93 crore.The weakness in metal and commodity stocks pulled down the BSE metal index by nearly 7%, while the basic materials index closed more than 4% down.