Mumbai: FPI-led selloff in the equity market accelerated on Thursday, with India turning out to be the worst-hit major market globally. Besides slowing demand in the vast Indian consumer market, a hawkish US Fed’s monetary policy stance exacerbated the woes of the Indian equity market.
Benchmark indices Sensex and Nifty-50 dropped below crucial 37,000 and 11,000 marks, respectively, over negative domestic and global cues.
Extending last month’s post- Budget slide of 4.9 per cent, investors’ continued to offload stocks as hopes of a turnaround in corporate earnings faded and disappointment with the new tax on high net worth individuals, including foreign portfolio investors (FPIs), grew.
Fear that the suicide of coffee tycoon V G Sidhartha will have a rub-off on the investment climate also weighed on the negative market sentiments.
On Thursday the Indian market stood out as one of the worst in the world, with Sensex and Nifty falling 1.23 per cent and 1.24 per cent, respectively, after recovering from the steep decline intra-day.
Overnight US benchmarks S&P 500 fell 1.8 per cent reacting to hawkish US Fed monetary policy stance and finally closed 1.09 per cent lower. Major Asian market indices too reacted with less than a per cent fall as the US central bank late on Wednesday night dashed market’s hope of an onset of a rate cut cycle and easy monetary policy regime coming.
While reducing the policy rate by 25 basis points, first after 2008, the Federal Reserve’s message that there may not be many more rate cuts dampened sentiment globally.
The Sensex plunged 786.94 points intra-day to the day’s low of 36,694.18 after a weak start as domestic cues were also not good, as the country’s largest carmaker Maruti reported 33.5 per cent drop in July sales from a year ago. However, strong recovery in the last 45 minutes of trade helped the index closes above the 37,000 level at 37018.32, down 462.80 points.
The broader Nifty-50 index fell more than 200 points intra-day to a low of 10,881.00 but recovered later to close near 11,000 level at 10,980, down by 138 points.
Deepak Jasani, Head -Retail Research, HDFC Securities, said, "Investors are slowly losing hope of a recovery in the economic growth and revival in the market over the next few weeks. Their portfolios have seen a massive hit for reasons that are not entirely clear to them."
The Sensex is down 8.17 per cent from its all-time high of 40,312.07 touched on June 4, just two weeks after new government came to power.
Mid-cap and small-cap indices have bled even more as the broader market correction has been going on and is far deeper while about 20 large-cap stocks have manged to keep benchmark indices movement in a narrow range so far. Compared to around five per cent fall in Sensex and Nifty in the last 30 days, the Nifty Midcap-50 Index is down 12.06 per cent and the Nifty Small-cap is down 12.98 per cent.
