Indian markets slide on weak global cues

Sensex, Nifty fall 1.2 per cent each, biggest one-day fall since Sept 12

Indian stock markets fell over a per cent on Monday tracking weak Asian and European markets, as investors turned cautious amid several headwinds. The US presidential debate, volatility in oil prices ahead of the Organization of the Petroleum Exporting Countries (Opec) meeting and slide in shares of European banks led by Deutsche Bank weighed on sentiment.

The benchmark Sensex lost 373.9 points or 1.3 per cent to close at 28,294, while the Nifty declined 108.5 points or 1.23 per cent to close at 8,723. Both indices had earlier seen their biggest single-day fall on September 12. Even broader markets followed suit as the Mid-cap index and Small-cap index closed 0.5 per cent lower. The India VIX, a gauge for market volatility, spiked 10 per cent to 14.56 on Monday, as traders braced for more sharp swings in days ahead.

"Nervous oil and weak Asian markets rendered a weak opening bias to Indian markets, and the weakness gained momentum, after Deutsche Bank dragged European markets down. Upcoming derivative expiry and US presidential debate has also put the focus on FII action, while SUUTI stake sale prospects kept a few index stocks under pressure," said Anand James, chief market strategist at Geojit BNP Paribas.

Banking, realty and auto sectors led the declines on Monday, as their sectoral indices lost more than 1.5 per cent each. Ahead of the Opec meeting shares of ONGC lost 3.84 per cent - the steepest for a Sensex company during the session. While shares of ICICI Bank, Tata Motors and NTPC lost 3 per cent each.

"Valuations are a concern right now and we will see consolidation and some correction on the way. Declines won't be very deep. The liquidity flow is strong and every correction will be bought into," said Ashish Kukreja, chief executive officer, Craft Financial Advisors.

Despite the fall, valuations of Indian equities continue to be on the higher end. According to Bloomberg, the one year forward price to earnings (P/E) of Sensex currently stands at 18.33 - the highest for any Asian market.

Foreign portfolio investors (FPIs) sold equities worth Rs 206 crore ($31 million) on Monday, while domestic institutions sold shares worth Rs 113, data showed. So far, CY16 has been a positive year for Indian equity markets in terms of inflows from overseas funds. FPIs have so far bought equities worth $6.7 billion.

Most European markets traded over a per cent lower triggered by fall in the banking shares and concerns about Opec's capacity to curb fuel output. Among Asian markets, Japan's Nikkei 225 lost 1.25 per cent while China's Shanghai Composite lost 1.76 per cent.

Saudi Arabia, the world's largest oil exporter and the leading member for the Organization of Petroleum Exporting Countries (Opec), sparked a plunge in oil prices on Friday when it said an upcoming meeting in Algiers would be consultative and unlikely to reach a firm decision on curbing output. That knocked investor sentiment that had been buoyed by the Federal Reserve's scaling back its timetable for raising interest rates. Algeria's energy minister said Monday that Saudi Arabia has offered to cut production to January levels.