Indices fall hard for fourth day amid global equity rout, pull-back by FPIs

The benchmark Sensex and Nifty indices dropped for the fourth day in a row on Wednesday, extending their month-to-date decline to over 5 per cent amid a global equity rout and sustained pull-back by foreign portfolio investors (FPIs).

The US Federal Reserve’s (Fed’s) decision to aggressively hike interest rates and reduce balance sheets to catch up with inflationary pressures has wreaked havoc across risky assets in recent weeks. Add to that, global growth concerns due to China’s Covid-management approach and jump in commodity prices attributable to the disruption in supply chains caused by the Russia-Ukraine conflict.

The Sensex on Wednesday ended at 54,088 - down 276 points, or 0.51 per cent.

The Nifty closed at 16,167 - down 73 points, or 0.45 per cent.

This was the lowest close for both indices since March 8. From this year’s peak in January, both indices are down nearly 12 per cent. 

The fall in other global markets has been steeper. For instance, the MSCI Emerging Markets (EMs) Index is down 28 per cent from its peak in February last year as MSCI China has more than halved during this period.

“Our economists’ view of the global outlook is considerably more gloomy than six months ago,” said Jonathan Garner, chief Asia and EM equity strategist, Morgan Stanley, in a note, adding, “Inflation has moved higher and now looks more persistent, with new shocks impacting supply chains, whilst geopolitical rivalries have shifted to outright conflict in Ukraine. The Fed is embarking on a far more aggressive combination of rate hikes and balance-sheet reduction than in 2018. Meanwhile, China’s incremental easing of policy and Covid-management approach have led our economics team to downgrade their near-term gross domestic product outlook on several occasions this year.”

India is among the priciest markets in the EM pack. Also, the downward revision in earnings in India is the worst due to high import dependence. Several top Indian companies failed to meet consensus earnings estimates during the March quarter due to margin pressure caused by surging inflation.

According to Bloomberg, of the 28 Nifty50 companies that have announced results so far, 11 missed estimates and 17 at least matched. Cipla and Asian Paints were the latest to report profit below the consensus view.

Only nine Sensex components advanced on Wednesday, while 22 declined. Larsen & Toubro, Bajaj Finserv, and Bajaj Finance fell the most, at over 2 per cent each. Axis Bank and IndusInd Bank rose 1.9 per cent and 1.4 per cent, respectively.

The market breadth was weak, with 730 stocks declining and 2,666 advancing. Shares of over 95 per cent of companies from the top 500 universe are down this month.

FPIs have pulled out over $2.5 billion from stocks this month, taking their year-to-date selling tally close to the $20-billion mark.