HDFC twins take mkts down by 1%, BSE-listed firms investors lose Rs 1.4 trn

A sharp decline in HFDC twins (HDFC and HDFC Bank), concerns over the stress in the US financial system and the possibility of a recession in the West pulled the markets back on Friday. 

The decline comes a day after both benchmark indices -- the Sensex and the Nifty50 -- closed at their highest levels in nearly five months, driven by positive quarterly earnings and healthy macroeconomic data.

The 30-share Sensex ended the session at 61,054 points, a decline of 695 points or 1.1 per cent. The Nifty50, meanwhile, ended Friday at 18,069 points, dropping 187 points or 1.02 per cent. For the week, the Sensex lost 0.1 per cent, while the Nifty50 managed to eke out a gain of 0.02 per cent. 

Friday’s loss wiped out investor wealth in BSE-listed companies by Rs 1.4 trillion.

Index heavyweights HDFC wins were the worst-performing Sensex stocks and accounted for most of the pack’s losses. Together, they contributed 653 points to the 695-point decline. HDFC Bank and HDFC went down 5.9 and 5.6 per cent, respectively, after global index provider MSCI announced that their merged entity will have a lower weighting.

Despite the sharp selloff in HDFC twins, foreign portfolio investor (FPI) flows stood at Rs 778 crore, while domestic institutional investors sold shares worth Rs 2,200 crore. 

Concerns about a recession and distress in the banking system in the developed world also kept the investors on tenterhooks. A note from Bank of America, citing EPFR Global data, said that the redemptions in global stock funds this week were the most in two months.

Meanwhile, strategists at JP Morgan Chase said that the coming days would see investors shifting their money into gold and technology stocks to hedge against any adverse outcome of the US banking crisis.

Since March, California's Silicon Valley Bank and New York's Signature Bank have seen heavy deposit outflows.

Although the US Federal Reserve’s (Fed's) measures quelled fears at the time, the strain resurfaced with troubles in First Republic Bank, raising fresh questions about how long should the US central bank keep interest rates elevated. Investors have also been disappointed about a lack of clarity from the Fed regarding resolving the banking crisis in the US.

From now on, the remainder of the corporate earnings results will determine the market trajectory.

"The second half of the earnings season is usually not the best one. Markets will be range-bound with a negative bias,” said UR Bhat, cofounder of Alphaniti Fintech

Siddhartha Khemka, head of retail research at Motilal Oswal Financial Services, expects the Nifty50 to consolidate in the near term on the back of subdued global cues and profit booking in index heavyweights.

On Friday, the market breadth was weak, with 2,127 stocks declining and 1,390 advancing.