Middle East conflict and foreign fund outflows lead to Rs10 lakh crore loss in Indian stock markets
MUMBAI: Fear of rising tension in the Middle East following Iran’s missile attack on Israel and its impact on the global economy, especially on the very crucial crude oil, weighed down heavily on India's equity market. Local equities fell sharply on Thursday and erased investors’ wealth by about Rs 10 lakh crore.
Benchmark BSE Sensex, on a single day on Thursday, tanked 1,769 points to slide to a three-week low. There were heavy selling in oil, banking and auto shares. Falling for the fourth day running, the Sensex today tumbled 2.10 per cent to settle at 82,497.10, its lowest closing level since September 11.
As many as 29 Sensex scrips closed in the red while only one stock ended in the green. Market capitalisation of BSE-listed companies dropped by around Rs 9.78 lakh crore to Rs 4,65,07,685.08 crore (USD 5.54 trillion).
The NSE Nifty slumped 546.80 points or 2.12 per cent to 25,250.10 with 48 of its constituents ending lower.
Besides rising tension in the Middle East, market regulator Sebi’s clampdown on the derivatives market, foreign institutional investors (FIIs) shifting to the ‘highly attractive’ China from India following a stimulus package by Beijing to revive the economy and profit booking in the Indian market after a strong bull run is said to have contributed to Thursday’s crack.
“There was carnage on Dalal Street as markets plunged on across-the-board selling pressure on twin concerns of foreign funds pulling out funds from emerging markets including India and steadily increasing exposure to Chinese markets after the recent stimulus measures, while the escalating tensions in West Asia too has set alarm bells amongst the investors,” said Prashanth Tapse, Senior VP (Research), Mehta Equities.
Mehta added that the second quarter earnings starting with frontline IT companies will set the tone of the market in the next few days. Also, Indian markets had witnessed a stupendous rally over the past one month and the correction was in the waiting for some time.
Vinod Nair, Head of Research at Geojit Financial Services, said that fears of retaliation by Israel and escalation in war could potentially drive-up oil prices and lead to inflationary pressures. Rising for the third straight day, Brent crude on Thursday rose above the $75 per barrel mark. India being a major importer will be impacted by this hike.
Nair added that new SEBI regulations for the F&O segment have raised concerns about reduced trading volumes in the broader market.
The Volatility Index or India VIX surged about 10% to 13.7, signalling a high level of anxiety among investors.
The losses extended to the broader markets as well with the Nifty Midcap index and Smallcap index shedding about 2% each. All 16 sectoral indices declined on Thursday, with Nifty Realty falling over 4%, followed by Nifty Auto and Bank Nifty. Among stocks, BPCL, L&T, Tata Motors, Shriram Finance and Axis Bank were among the top losers in the Nifty 50 pack.
Shrikant Chouhan, Head of Equity Research, Kotak Securities said that a bearish candle on daily charts and correction continuation formation on intraday charts indicating further weakness from the current levels.
“We are of the view that, as long as market is trading below 25365/82800 the weak sentiment is likely to continue. On the down side, it could slip till 25150-25025/82200-82000 or 50 day SMA.
On the other side, one quick technical pullback is likely if the market succeeds to trade above 22365/82800. Above the same, it could bounce back till 25475-25500/83100-83300. The current market texture is volatile hence; level-based trading would be the ideal strategy for the day traders,” added Chouhan.
From the 30 Sensex firms, Larsen & Toubro, Reliance Industries, Axis Bank, Asian Paints, Tata Motors, Bajaj Finance, Maruti, Bajaj Finserv, Kotak Mahindra Bank, Titan, Adani Ports and HDFC Bank were the major laggards. JSW Steel emerged as the only gainer.
The BSE midcap gauge tumbled 2.27 per cent and smallcap index dropped 1.84 per cent. All indices ended lower.
Realty tanked 4.49 per cent, while capital goods (3.18 per cent), auto (2.94 per cent), services (2.87 per cent), industrials (2.75 per cent) and oil & gas (2.52 per cent) were among the major losers.
A total of 2,881 stocks declined while 1,107 advanced and 88 remained unchanged on the BSE.
"Fears of FPIs and FIIs switching to China from Indian equities were prevalent, especially considering the sharp valuations of domestic markets compared to China," said Devarsh Vakil, Deputy Head of Retail Research, HDFC Securities.
In Asian markets, Hong Kong settled lower while Tokyo ended in the positive territory.
Markets in mainland China will be closed for the rest of the week due to the holiday.
European markets were trading mostly lower.
The US markets ended marginally higher on Wednesday.
Foreign Institutional Investors (FIIs) offloaded equities worth Rs 5,579. 35 crore on Tuesday, according to exchange data.
Global oil benchmark Brent crude climbed 1.37 per cent to USD 74.91 a barrel. Equity markets were closed on Wednesday for Mahatma Gandhi Jayanti.