India's equity market fell sharply on Monday after hitting multiple highs last week as investors rushed to book profit amidst valuation concerns and worsening geopolitical tensions, especially in the Middle East.
At close, the BSE Sensex was down 1,272.07 points or 1.49% at 84,299.78, and the NSE Nifty50 fell 368.20 points or 1.41% at 25,810.80. This is the biggest single-day slump for benchmarks in nearly two months.
Investors lost a whopping Rs 3.55 lakh crore on Monday as the market capitalisation of all listed companies on the BSE came down to Rs 474.38 lakh crore. In the broader market, the BSE Midcap index closed the session with marginal losses, while the Smallcap index ended flat.
"Global markets turned topsy turvy under the threat of rising geopolitical risk in the Middle-East and plausible increase in Yen interest rate which can reduce cross country investments in equity… Going ahead the domestic focus will be on the upcoming Q2 results where earnings growth is expected to revert after the dull Q1,” said Vinod Nair, Head of Research, Geojit Financial Services.
Markets in India reeled under this global pressure and premium valuation concerns.
As Israel has increased its frequency of attacks against Hezbollah in Lebanon and the Houthi militia in Yemen, there is increased fear that the ongoing conflict may become a wider regional issue. An increasing tension may also lead to an increase in oil prices.
Meanwhile, Japanese shares fell sharply on Monday with the benchmark Nikkei 225 index tumbling nearly 5% after the ruling Liberal Democrats chose former Defence Minister Shigeru Ishiba to succeed Prime Minister Fumio Kishida. Ishiba is a vocal supporter of the Bank of Japan's moves to raise interest rates from their near-zero level which in return would lead to a stronger Yen.
On the contrary, the Chinese market rose sharply on Monday due to a large stimulus package and cheap valuation compared to India and other big emerging markets. While this had a favourable impact on metal stocks in India, there are fears that foreign institutional investors (FIIs) would shift their focus from here to China. FIIs sold (net sales) shares worth nearly Rs 10,000 crore on Monday,
Ajit Mishra, SVP, Research at Religare Broking, said that the Nifty's three-week upward streak had pushed the index into overbought territory, leading participants to trim their positions amid mixed global signals.
"The broad-based decline in heavyweight stocks put the bulls on the back foot, potentially paving the way for some consolidation. The next crucial support for Nifty is around the 25,560 level, near the short-term moving average i.e. 20 DEMA. If a rebound occurs, the 26,000-26,250 zone could pose resistance," added Mishra.
Among the sectors, only Metal and Media managed to end Monday in the green.
Auto and Realty declined by over 1.60%.
Hero MotoCorp, Trent, Axis Bank, Reliance Industries, Bharat Electronics were among the top losers on the Nifty, while gainers are JSW Steel, Hindalco Industries, NTPC and Tata Steel.