Equity benchmarks, already battered this week amid concerns of flows shifting to China, got another jolt as escalating tensions in the West Asia led to investors dumping risky assets.
Foreign portfolio investors (FPIs) sold shares worth Rs 15,243 crore on Thursday, according to provisional data from the exchanges, marking the highest-ever single-day sale.
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FPIs have sold shares worth Rs 26,879 crore over the last three days, amid a sharp 30 per cent rebound in Chinese markets from their September lows.
The benchmark Sensex declined 1,769 points, ending the session at 82,497, a 2.1 per cent fall. The Nifty 50 index fell 547 points to end the session at 25,250, a decline of 2.1 per cent.
The Nifty posted its third-biggest fall of the year, following drops on June 4 and August 5, when the shock verdict of the Lok Sabha elections and concerns about the reversal of the yen carry trade and disappointing jobs data rattled the markets.
For Sensex, this was the fourth-worst fall of the year.
Domestic equity benchmarks were also the worst-performing global indices. India VIX, a gauge measuring market volatility, rose 10 per cent and ended the session at 13.2.
Thursday’s rout wiped out investor wealth worth Rs 9.8 trillion, with India’s total market capitalisation dropping to Rs 465 trillion.
Iran’s missile attack on Israel has left investors across the globe worried, with concerns over Israel’s potential response. Israel bombed Beirut overnight, retaliating for the deaths of eight soldiers in a battle with Hezbollah. The latest round of tensions, with Israel directly pitted against Iran, has raised concerns about its impact on oil prices and global geopolitical stability.
The region accounts for about a third of global oil supplies, and a cascading effect is expected if oil facilities or supply routes are attacked.
Crude oil rose for the fifth consecutive session, trading at $75.4 per barrel. Over the last five sessions, Brent crude has risen 6 per cent.
“Foreign funds might want to move quickly to China, so they must reduce weightage in India. When flows return to emerging markets, they will top up India or China, depending on market conditions. Our markets were overbought anyway. Rising crude prices are a negative for India, but we have been buying from Russia; perhaps the expectation of an RBI cut next week is now off the table,” said Andrew Holland, CEO of Avendus Capital Alternate Strategies.
After recording fresh highs on Thursday, the Nifty has declined by over 4 per cent from its peak.
In addition to global headwinds, the RBI’s monetary policy decision this month, macro data from the US that will give cues on future US rate cuts, and quarterly results in India are expected to determine the market trajectory.
“The result season is unlikely to be great. But if the RBI cuts rates, it will be a positive. The expectations will be that things will start to pick up, interest rates will come down, people will have more money to spend, and companies will invest,” said Holland.
Reliance Industries, which fell 3.9 per cent, was the biggest contributor to Sensex’s decline. Over the last three days, Reliance Industries has declined 7.8 per cent, with West Asia tensions creating uncertainty for its oil refining business.
Market breadth was weak, with 2,881 stocks declining and 1,107 advancing.
Among sectoral indices, the Nifty Realty Index fell the most at 4.4 per cent, followed by Nifty Auto and Oil & Gas, which each fell nearly 3 per cent.
“I don’t see a huge fall from here as domestic liquidity support is intact. Domestic flows will go into larger names, ones that haven’t moved in a long time. Any midcap that rallied and has a 30-40x P/E could see a correction,” said Amar Ambani, executive director of Yes Securities.
First Published: Oct 03 2024 | 7:43 PM IST
