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The Indian market posted its biggest single-day fall in about two months, ahead of the derivatives expiry, as investors turned cautious on weak economic data in Europe and China.
Nervousness also persisted with gold seeing some safe-haven demand, as the US and its Arab allies launched a series of airstrikes against Islamic State in Syria.
The BSE Sensex ended 431 points, or 1.58 per cent, lower than its previous close, at 26,775, while the National Stock Exchange’s Nifty closed at 8,017, down 128 points, or 1.58 per cent — the most in about two-and-a-half months.
“Disturbing news of political tensions with the US air strikes on Syria, besides economic data from China, made the market nervous,” said Nirmal Jain, founder & chairman of IIFL. He said the market was in the overbought zone and was looking for an excuse to pare some of its gains.
The India VIX index, a gauge of market volatility, jumped seven per cent to 12.41, ahead of the expiry of derivatives contracts on Thursday. Typically, the market turns volatile during the expiry of monthly derivative contracts.
Global markets also traded weak on the back of disappointment over China unemployment data and a weakness shown by European manufacturing data.
Analysts said foreign investors’ appetite for stocks in emerging markets like India had diminished, as the US Fed prepared to wind down its bond-buying programme and raise interest rates.
“In recent days, you have seen more subdued global markets. Nervousness is only set to increase as the US interest-rate increase comes closer,” said Piyush Garg, executive director, ICICI Securities.
The US dollar has gained against major global currencies in the past month. Market experts believe the recent strength in the dollar is indicative of an earlier-than-expected rise in the US interest rates. The rupee on Tuesday fell to Rs 60.94 a dollar, down 10 paise from its previous close.
At its meet earlier this month, the US Fed had reiterated its stand that it would keep interest rates low for a “considerable time”. Market players are expecting interest rates in that country to go up in the second half of next calendar year.
Investors sold shares in companies from the real estate, capital goods and oil & gas sectors. Among index stocks, ICICI Bank, Reliance Industries and L&T contributed to the bulk of the declines. On BSE, for every two stocks that fell, one gained.
Derivative analysts said investors were unwinding their long positions ahead of Thursday’s expiry. This could put downward pressure on the market in coming days.
