NEW DELHI: Investors lost a whopping Rs 8 lakh crore on Tuesday as the country’s equity market crashed for the second time in less than a week.
BSE Sensex declined 1.47% (1053.1 pts) to close at 70,370.55 and the NSE Nifty50 was down 1.54% (333 pts) to 21,238.8 on Tuesday on persistent FII (foreign institutional investors) selling amid muted global sentiment and valuation concerns.
Market capitalisation of BSE-listed firms came down to Rs 366 lakh crore, a drop of Rs 8 lakh crore from the previous session closing.
The wipeout in investors’ wealth can be attributed to all-around selling in the market. Broader markets, which were holding their forte so far, registered a sharper fall than the headline indices. The NSE midcap and smallcap indices fell 3% each on Tuesday.
“Selling by FIIs due to reasons like high valuation and mixed results for the earnings season so far, along with recent escalations in tensions in the Middle East and Red Sea, prompted investors to book profit from the recent rally,” said Vinod Nair, head of research, Geojit Financial Services.
As per provisional NSE data, FII’s net selling of equities stood at over Rs 3,100 crore on Tuesday. Shares of HDFC Bank, the biggest culprit behind last Wednesday’s fall, plunged another 3% on Tuesday to close at Rs 1,431 apiece.
Prashanth Tapse, Senior VP (Research) at Mehta Equities, said reports saying SEBI has drafted a paper to impose tightened ultimate beneficial ownership norms for overseas investors with effect from February 1 have worried FIIs. Reports say funds that are unable to comply with new norms may sell Indian equities up to Rs 2 lakh crore in next six months.
Analysts say signs of a rate cut in the US not happening sooner than expected in making investors uncomfortable with current valuations. They say the selling pressure to continue as a record rally of 3 months is weighing on investors’ sentiments to book profits.
Ajit Mishra, SVP - technical research, Religare Broking, said the pace of fall shows more pain ahead and the 20,800-21,000 zone may offer some support. “Earlier, we were seeing private banking majors facing the heat but it is cascading to the other sectors and to the broader indices. We recommend keeping a check on leveraged positions and maintaining shorts too,” added Mishra.