NEW DELHI: Domestic equity market declined sharply on Wednesday with the benchmarks -- Sensex and Nifty -- plummeting over 1%. During the intraday trade, the Sensex cracked up to 1,000 points and for the full day, investors lost a whopping `3.5 lakh crore.
Weak economic data from China and Fitch’s downgrade of US long-term debt rating on fiscal concerns weighed on investor sentiment and led to profit booking. Besides, foreign investors turning net sellers amidst valuation concerns intensified the selling pressure.
The results season too hasn’t been very robust with 18 Nifty companies beating the estimates and 15 missing. For the day, the BSE Sensex closed 676.53 points, or 1.02%, lower at 65,783 points. It had touched an intraday low of 65,431.68. Nifty50, after falling to a low of 19,423.55, closed 207 points, or 1.05% lower at 19,526.55.
Santosh Meena, head of research, Swastika Investmart, said the downgrade of the US rating by Fitch could provide an opportunity for some investors to take profits, leading to a possible pullback in the market. Signs of exhaustion are evident at higher market levels, following a strong rally from the lows in March. Foreign Institutional Investors (FIIs) have turned net sellers in the past few days, indicating a cautious stance in the market, added Meena.
FIIs sold equities (net value) worth `1,877.84 crore on Wednesday, showed NSE data. In the Sensex pack, Tata Steel, Tata Motors, Bajaj Finserve, NTPC, SBI and JSW Steel fell between 2-3%. Sector-wise, all the 15 sub-indices on the NSE were in red with Nifty Bank, Nifty Financial Services, Nifty Auto and Nifty Metal declining the most. Global markets also witnessed a meltdown following the Fitch rating cut with Japan’s Nikkei and Hong Kong’s Hang Seng index slipping more than 2% each.
V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services, said that the US 10-year bond yield spiking above 4% and the dollar index rising to 102 are near-term negative for emerging markets. “But it is important to note that the downgrade doesn’t say anything that the market doesn’t know. So, the negative knee-jerk reaction will be short-lived. Globally equity markets have been rising on the US economy’s soft landing narrative. The downgrade doesn’t alter that,” said Vijayakumar.