Markets crash as FII sell-off continues

Foreign investors shift to cheaper markets amid weak Q2 earnings, stronger bond yield & dollar
Image used for representational purposes only.
Image used for representational purposes only.FILE | ANI
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NEW DELHI: India’s equity market benchmark NSE Nifty50 on Tuesday plunged to its lowest level since mid-August amidst relentless selling by foreign institutional investors (FIIs), weak September quarter corporate earnings, strengthening of bond yield and dollar, and diminishing chances of another interest rate cut by the US Federal Reserve.

India’s benchmark indices—NSE Nifty and BSE Sensex—fell more than 1% each on Tuesday. The Sensex fell 930 points, or 1.15%, to settle at 80,220, while the broader NSE Nifty plunged 309 points, or 1.25%, to close at 24,472.

Investors lost more than Rs 9 lakh crore on Tuesday as the market capitalisation of all listed companies on BSE came down to 445.5 lakh crore from Rs 454.6 lakh crore on Monday. The rupee weakened on Tuesday to settle at a new closing low of Rs 84.08 against the USD.

“Bearish sentiments continued to dominate the domestic market on Tuesday amid heightened volatility with small- and mid-cap stocks taking the biggest hit,” said Vinod Nair, head of research, Geojit Financial Services. Nifty Smallcap 100 index fell 3.92% on Tuesday and the Nifty Midcap 100 declined by 2.61%.

“The recent sharp rise in US bond yields signals diminished expectations for aggressive rate cuts by the US Fed, also affecting fund flows to emerging markets. In the short term, this bearish outlook may persist due to sluggish earnings growth trends,” added Nair.

FIIs continue to flee ‘expensive’ India for cheaper markets such as China and Hong Kong. This, say experts, is causing maximum pain to local equities. In October, FIIs have so far offloaded a record Rs 72,136 crore from Indian equities, according to NSDL data. Provisional data issued by NSE showed that FIIs sold shares worth Rs 4,000 crore on Tuesday.

October has seen the highest outflow ever in the Indian market, overtaking the selling seen when the pandemic hit the markets in March 2020. FPIs had then sold Rs 65,816 crore worth of Indian stocks in a single month.

“Nifty has now corrected by around 7% from its record high, reaching the critical moving average support at 100 DEMA. The outlook suggests further downside, particularly in the mid- and small-cap spaces,” said Ajit Mishra of Religare Broking.

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