A major sell-off by foreign institutional investors (FIIs) saw key domestic equity benchmark indices fall to their lowest levels in six weeks. Anticipation of a rise in key interest rates by the Reserve Bank of India to rein in soaring inflation is cited as the main reason for the exodus of large hedge funds and exchange-traded funds from the market.
Monday saw the broader S&P CNX Nifty of the National Stock Exchange down 141.75 points, or 2.40 per cent, at 5,762.85. In the past five trading sessions, both the indices have witnessed a fall of over 6 per cent.
According to provisional data, FIIs net sold stock worth Rs1,138.78 crore today. However, domestic institutions were seen supporting the markets; they made net purchases of stocks worth Rs1,018.54 crore.
Global cues were negative, with Asian markets sliding on disappointing US job data and rising pressure on Portugal from other Eurozone countries to seek financial help to prevent the debt crisis from spreading.(Click for graph)
European indices like the Paris CAC 40 and London’s FTSE fell 1.7 per cent & 0.7 per cent, respectively. Dow Jones and Nasdaq futures were down 0.4-0.5 per cent. Equity benchmarks in Singapore, Indonesia, China, South Korea and Hong Kong slid by between 0.26 and 4.45 per cent.
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Market analysts are of the view that valuations look stretched and that third-quarter corporate results, which start from Wednesday, had been discounted.
“A lot of short-term optimism had been built in and some of it is now being settled. While global developments have led to near-term concerns, domestic corporate numbers have already been discounted. Most brokerages have also come out with subdued strategy reports,” said Harendra Kumar, head of institutional equities & global research at Elara Capital.
Stock brokers said large institutions were also keeping a close eye on political developments on reports of a likely Cabinet reshuffle by next week.
Banking stocks declined on concerns that higher deposit rates may impact net interest margins, thereby hurting profitability. Top lenders HDFC Bank and ICICI Bank fell by 5 per cent and 3.22 per cent, respectively.
All the 13 sectoral indices ended the day lower. The BSE Realty and BSE Capital Goods indices were the worst hit. The Realty index saw a dip of 94.66 points to close at 2,570.94, while the Capital Goods index fell 516.35 points to end at 14,165.33.
Heavyweight capital goods giant Larsen & Toubro slumped by 3.53 per cent while realty majors JP Associates and DLF saw a dip of 4.18 per cent and 3.33 per cent, respectively.
A fall of 3.18 per cent in the share price of the most valued firm, Reliance Industries, weighed heavily on the falling markets.
The market breadth was weak, as 2,311 share counters saw declines, against advances on 633 on the BSE.