Markets shed 5% in as many days as FPI selling intensifies on global cues

Intensified selling by overseas investors amid rising bond yields in the US and concerns over the global growth outlook has led to a near 5 per cent drop in the benchmark indices in the last five trading sessions.

Foreign portfolio investors (FPIs) on Tuesday sold shares worth Rs 5,871 crore, taking their five-day selling to about Rs 18,000 crore.

The Sensex on Tuesday fell 703 points, or 1.23 per cent, extending its five-day decline to 2,984 points, or 5.02 per cent. After breaching the 18,000 mark on April 4, the Nifty ended below 17,000 on Tuesday, settling at 16,958, with a fall of 215 points, or 1.3 per cent.

The 10-year Treasury yield in the US hit 2.91 per cent, the highest since late 2018, while German and UK 10-year yields climbed to their highest since 2015.

HDFC group companies and Infosys continued to weigh on the indices. HDFC Bank on Tuesday fell 3.7 per cent, HDFC 5.5 per cent, and Infosys 3.5 per cent.  Reliance Industries proved to be the saving grace as the company rose 3.7 per cent and made a 288-point contribution to the index gains.

The March quarter numbers posted by HDFC Bank and Infosys failed to meet investor expectations and triggered a sell-off in other IT and financial stocks as investors feared earnings downgrades. The market sentiment remained weak, with 2,120 stocks declining and 1,294 advancing. IT stocks declined the most, and its index on the BSE fell 2.6 per cent.

"The stocks of Infosys and HDFC Bank have been downgraded. They are two of the best in their sector. The thinking now is that this will be a continuous feature as we go on. The inflation figures yesterday were quite high as well. Local liquidity is driving the markets. In the next few days, we might see volatility,” said Andrew Holland, chief executive officer (CEO), Avendus Capital Alternate Strategies.

Domestic institutional investors pumped in close to Rs 4,000 crore on Tuesday.

The ongoing Russia-Ukraine war and high inflation are also keeping investors on tenterhooks. Globally, investors weigh the prospect of aggressive policy action to curb inflation. The 10-year US bond yield was trading at 2.8 per cent, the highest since December 2018.

Investors are betting on a 50-basis point rate hike next month.

Central banks across the globe are under pressure to contain inflation amid the war in Ukraine, and the Covid situation in China has further exacerbated the inflationary pressures. The pressure to manage inflation while slowing the global economy has put them on a sticky wicket.

The geopolitical tensions have led to the World Bank lowering its estimate for global growth in 2022 to 3.2 per cent from the January prediction of 4.1 per cent.

"As the fourth quarter (Q4) season is underway, the markets will closely monitor the earnings and management commentary for the next few weeks. Moreover, the trend in global stock markets, the rupee movement against the dollar and crude oil prices will also influence the equity markets in the near term,’' said Mitul Shah, head of research, Reliance Securities.