Stung by global issues and staring at the last two rounds of voting in the Lok Sabha elections, nervous markets extended their losses for a sixth consecutive day on Wednesday, but the cut was deeper.
The BSE Sensex dropped below 38,000 and closed a whopping 488 points or 1.27 per cent lower at 37,789, and the NSE Nifty fell 138 points or 1.2 per cent to close at 11,359. Selling pressure was seen across sectors in mid and small-cap as well as large-cap stocks and index heavyweights like Reliance, HDFC and ITC.
“More the market falls (now), less volatile it is going to become after the election outcome,” said V.K.Sharma, Head, Private Client Group, HDFC Securities. If it is a non-BJP led combination that comes to power, there could be a 7-10 per cent fall. “Markets can overcome it in three months. It is not a concern in the longer term, but in the short term obviously,” Sharma said.
But, at a broader level, the fourth quarter results of companies, liquidity worries that persist in the financial services, specifically the NBFC sector, and the course of the economy are a bigger worry for the markets. After the poor auto sales growth impact, the single-digit growth of FMCG companies has left the markets worried.
“India has been a consumption-driven economy and will continue to be one. Within a multi-year positive market, if one or two quarters disappoint, that does not really mean you have to write off the sector,” said Gaurang Shah, Head Investment Strategist, Geojit Financial Services.
Indian markets were also moving in tandem with the global markets hit by the renewed US-China trade war. Among the other major global factors are crude oil prices and OPEC’s about-turn extending production cuts further instead of easing them as per US wishes, analysts said.
Amid all the gloom, the positive spark was the listing of recent IPO Neogen Chemical on Wednesday with listing gains of 16.7 per cent, rising further to 22 per cent.
One way to look at the current situation is as an opportune time to cherry pick some long term investment ideas, said Shah, adding, "Take home cash, reduce your short to medium term position and in the long term be ready to deploy funds at intervals."