Nifty closes near five-month low; earnings miss, foreign outflows weigh

The benchmark National Stock Exchange Nifty fell to its lowest level in nearly five months due to sustained selling by overseas funds and sharp losses in index heavyweights, which weighed on market performance. Earnings disappointments and more attractive investment prospects in the US also kept investor sentiment subdued.

 

Falling for the fourth consecutive day, the Nifty declined by 258 points, or 1.07 per cent, to close at 23,883 — its lowest close since June 26. The S&P BSE Sensex dropped 821 points, or 1.03 per cent, to close at 78,675, marking its lowest level since August 6. The total market capitalisation of BSE-listed companies fell by Rs 5.2 trillion to Rs 437 trillion.

 

Since reaching all-time highs on September 26, the Sensex has fallen by 8.3 per cent, and the Nifty is down almost 9 per cent.

 

HDFC Bank was the largest contributor to the Sensex’s losses, and it was the second-worst-performing stock in the index. HDFC Bank’s shares closed at Rs 1,718.4, a decline of 2.7 per cent. State Bank of India fell by 2.5 per cent, and NTPC, which dropped 3.2 per cent, were other big drags on the index.

 

Biscuit-maker Britannia saw a 7.3 per cent decline after missing second-quarter profit estimates. Meanwhile, India’s retail inflation surged to a 14-month high in October, reaching 6.1 per cent, driven by a jump in food prices.

 

Indian equities have been undergoing a selloff since October, amid a recovery in China’s markets fuelled by Beijing’s aggressive stimulus measures, rising US bond yields despite the US Federal Reserve’s (Fed’s) shift towards rate easing, and disappointing earnings reports from Indian companies for the July-September quarter.

 

Investors are also evaluating the impact of US President-elect Donald Trump’s economic policies, including trade tariffs and immigration crackdowns, which could spur inflation and influence the trajectory of the Fed’s monetary policy.

 

Analysts say that if trade tensions between China and the US escalate, it may lead to further strengthening of the dollar as investors seek safe havens. The rupee hit a fresh intraday low of 84.41 against the US dollar on Tuesday.

 

Foreign portfolio investors (FPIs) were net sellers of Rs 3,024 crore on Tuesday, while domestic institutions were net buyers to the tune of Rs 1,855 crore. In October, FPIs sold shares worth a record Rs 1 trillion, and so far this month, the selling has exceeded Rs 25,000 crore.

 

“One can ascribe multiple reasons for the swing in foreign flows — earnings disappointment, US 10-year yields rising (up approximately 80 basis points since mid-September), a 4.2 per cent strengthening of the dollar index, and policy changes that have shifted flows to Chinese and Japanese markets,” said a note by Axis Mutual Fund (MF).

 

“FPI-triggered selling pressure continues to affect the domestic market. The recent strengthening of the dollar, driven by aggressive Trumponomics, is adding to fears. Additionally, the anticipated rise in domestic inflation due to higher food prices and a depreciating rupee may influence the Reserve Bank of India’s monetary policy,” added Vinod Nair, head of research at Geojit Financial Services.

 

Experts said the decline in broader markets and specific stocks has been deeper than during past selloffs.

 

“In recent years, Indian equities have been immune to volatility, given strong macros, robust earnings growth, and, importantly, strong domestic flows. However, volatility appears to be back in Indian equities, with benchmark indices down by over 8 per cent in the past month. The broader market correction has been steeper, with over 125 stocks in the NSE 500 down more than 25 per cent from their recent peaks,” the Axis MF note added.