NEW DELHI: After strong resistance, India’s equity market succumbed to global recession fears on Friday.
The BSE Sensex nosedived 1,093.22 points or 1.82 per cent, to settle at 58,840.79 and the broader NSE Nifty50 index fell 346.55 points or 1.94 per cent to close at 17,530.85. This is the third consecutive session when the two indices ended in the red. On Friday alone, the market cap of BSE-listed firms fell to Rs 279.68 lakh crore from Rs 285.87 lakh crore, causing a loss of Rs 6.19 lakh crore to investors.
Top Asian indices such as Shanghai SE Composite Index, Nikkei 225 and Hang Seng fell between 1 per cent and 2.30 per cent, respectively, on Friday. The fall came as the IMF and the World Bank warned about looming recession and aggressive policy tightening by the central banks. The US Fed is expected to go for an aggressive rate hike of 75 bps next week after the country reported higher-than-expected consumer inflation for the month of August at 8.3 per cent.
This, experts say, will tighten liquidity in the equity market and is a big negative for emerging markets like India. Foreign institutional investors remained net sellers on Friday, selling shares worth Rs 3,260 crore. “Indian markets today chose to mirror global cues after outperforming global peers in the recent past.
Weaker domestic flows for last month despite SIPs maintaining their run rate led to profit-taking, as all sectoral indices ended in the red. As global investors brace for a further interest rate hike post the US inflation data released recently, the RBI too has its task cut out in India when they meet at the end of this month,” said S Ranganathan, head of research at LKP Securities.
Ajit Mishra, VP - of research, Religare Broking, said the last two days of the slide have engulfed the gains of the last week and a fall below 17,500 in Nifty may result in a further slide.
“We recommend maintaining a cautious stance and limiting positions. Among the sectoral pack, banking is still looking comparatively stronger so participants can continue with ‘buy on dips’ in private banking names,” he added. Selling pressure was seen in IT, realty and auto pack.
A number of agencies cutting down their forecasts for India’s economic growth after June quarter GDP data have started weighing on investors’ sentiment. Fitch Ratings cut its forecast for India’s GDP growth to 7 per cent for FY23 from 7.8 per cent announced earlier, while Moody’s cut its real growth forecast to 7.7 per cent for the calendar year 2022 from an earlier projection of 8.8 per cent.