 "FPI selling pulls indices down for 3rd straight day; Sensex falls 495 pts")
Indian equity benchmarks declined for the third consecutive session on Thursday as heavy foreign portfolio investors (FPI) selling, clouded earnings outlook, and elevated valuations continued to act as headwinds for the markets.
Bajaj Auto's warning about weak festival demand further put pressure on equities. The Sensex ended the session at 81,007, a decline of 495 points, or 0.6 per cent. The Nifty ended the day at 24,750, a drop of 221 points, or 0.9 per cent. Both indices are down 4 per cent each, with FPI selling topping Rs 71,000 crore (Rs 71,441 crore) month to date, including provisional outflow of Rs 7,421 crore, on Thursday — the worst-ever for a calendar month. The record outflows are seen on account of FPIs rotating out of India into China.
The combined market capitalisation of BSE-listed stocks declined by Rs 6 trillion to Rs 457 trillion.
HDFC Bank and M&M were the biggest contributors to the decline of the Sensex. HDFC Bank declined by 1.6 per cent and M&M by 3.3 per cent. FPIs held a 48 per cent stake in HDFC Bank as of September 2024.
Bajaj Auto declined 13 per cent after it said during its results announcement that festival season demand for motorcycle sales around Dussehra was weaker than expected. The company said there's still time for a potential surge in demand but it's unlikely to reach the expected growth rate. Bajaj’s outlook created panic among investors, who felt that the demand for discretionary items would be hit, and fuelled concerns for other sectors like property, where ticket sizes are even bigger.
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Realty and auto stocks declined the most, and their sectoral indices on BSE fell 3.8 per cent and 3.5 per cent, respectively. Indian equities have been reeling from pressure due to concerns about weak earnings, FPI outflows to China, and an uncertain rate hike trajectory of the US Federal Reserve.
Gold climbed to a record high and was trading at 42,683 per ounce amid a spurt in demand for haven assets. Even in the domestic market, the yellow metal prices surged past Rs 77,000 for the first time.
“Rising domestic inflation data released this week and continued FPI selling weighed on the market sentiment. This along with disappointing second quarter earnings from major companies added to the pressure. Looking forward, the market is expected to remain range-bound due to mixed global cues and a lack of domestic triggers," said Siddhartha Khemka, head of retail research of Motilal Oswal Financial Services.
Going forward, the remainder of corporate results and the statements of monetary policy officials in the US will determine the market trajectory.
"The domestic market experienced significant losses driven by widespread selloffs across various sectors, notably auto, realty, consumer durables, and finance. This downturn was attributed to weaker sales forecasts for the festive season, high NPAs and slow credit growth. Weak Q2 results are affecting the market sentiment. Conversely, the IT sector outperformed as a contrary bet and in-line Q2 results," said Vinod Nair, head of research at Geojit Financial Services.
Market breadth was weak with 2,754 stocks declining and 1,219 advancing. The Nifty Midcap 100 and Nifty Smallcap 100 fell by 1.6 per cent and 1.2 per cent, respectively.