 "India's benchmark indices rallied on Friday, mirroring gains in global equities, after the latest US economic data allayed fears of recession in the world's biggest economy. The continued buying support from domestic investors added to the market buo")
Indian equity benchmarks on Monday plunged more than 1.5 per cent to post their worst single-day decline in three months amid continued foreign portfolio investor (FPI) selling and weak business updates from Indian lenders that raised concerns about corporate results in the December quarter.
What added to investor nervousness was the detection of five flu-like Human Metapneumovirus (HMPV) cases in Karnataka and Gujarat, even as the government has said there is no need to panic.
The Sensex ended the session at 77,965, a decline of 1,258 points or 1.6 per cent, while the Nifty closed at 23,616, down by 389 points or 1.6 per cent. Monday’s decline marks the biggest fall for both indices since October 3.
India VIX, a gauge of market volatility, increased by 15.6 per cent to 15.7, its highest since November 22, 2024. The total market capitalisation of BSE-listed firms fell by nearly Rs 11 trillion to Rs 438 trillion.
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Business updates for the December quarter dented market sentiment and triggered a selloff in banking stocks. HDFC Bank declined by 2.2 per cent, becoming the second-biggest drag on the Sensex. Kotak Mahindra Bank, SBI, and Axis Bank also fell.
“Over the weekend, banks came with their loan and deposit growth, which was very poor. The hMPV scare was an extra negative on top of a weak market,” said Andrew Holland, chief executive officer of Avendus Capital Public Markets Alternate Strategies.
On Monday, FPIs net sold equities worth Rs 2,575 crore. So far this month, FPIs have sold Rs 7,160 crore worth of equities. Indian markets have faced a selloff since late September due to lacklustre corporate earnings and weakening demand. Elevated valuations and FPIs shifting investments to more attractive markets, such as the US, have further weighed on investor sentiment. Meanwhile, the rupee hit a fresh low of 85.8 against the US dollar.
“Ahead of Donald Trump’s inauguration, it’s impossible to work out what his policy is going to be, and FPIs would prefer to sit on the sidelines, and markets had a reasonably good move on the first few days of January. Hence, they are taking money off the table,” said Holland.
Going forward, corporate earnings for the December quarter, the Union Budget in February, and potential policy shifts in the US after Trump assumes presidency will determine market trajectories. The earnings season will kick off this week with software bellwether TCS’s results.
The broader Nifty Midcap 100 declined by 2.7 per cent, marking its sharpest fall since December 20, while the Nifty Smallcap 100 dropped by 3.2 per cent, its biggest fall since October 22. Market breadth was weak, with 3,530 stocks declining and 611 advancing on the BSE. Apart from HDFC Bank, ITC (down 2.8 per cent) and Reliance Industries (down 2.7 per cent) were the biggest contributors to the Sensex’s decline.
ITC’s shares fell by 2.75 per cent from the opening price on Monday, which was arrived at after a special price discovery session to adjust for the demerger of its hotels division.
“This pullback in the Nifty index, coupled with a spike in volatility (India VIX), has disrupted the recovery trend, signalling potential challenges ahead,” said Ajit Mishra, SVP of research of Religare Broking.
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