FPIs squeeze markets for a sixth day; Sensex ends 639 points lower

Benchmarks S&P BSE Sensex and National Stock Exchange Nifty declined for the sixth consecutive session on Monday amid sustained selling by foreign portfolio investors (FPIs).

Concerns over tepid corporate earnings growth and the trajectory of US Federal Reserve (Fed) rate cuts compounded investor anxieties.

The domestic market has been grappling with foreign fund flows shifting to China and the fallout from the Iran-Israel conflict.

The Sensex ended the session at 81,050, a decline of 639 points, or 0.8 per cent. The Nifty closed at 24,796, a drop of 219 points, or 0.9 per cent. The total market capitalisation of BSE-listed companies decreased by Rs 8.9 trillion to Rs 452 trillion.

 

The Nifty has declined by 5.4 per cent over the past six sessions, while the Sensex has fallen by 5.6 per cent.

FPIs sold shares worth nearly Rs 8,300 crore, extending their month-to-date selling to almost Rs 40,000 crore. Domestic institutional investors bought shares worth Rs 13,245 crore — their highest single-day purchase.

In a note, Motilal Oswal Financial Services estimated that Nifty earnings would grow marginally by 2 per cent in the quarter ended September, the lowest growth in 17 quarters.

Additionally, news reports that CLSA was reducing its India exposure while increasing its China exposure weighed on sentiment.

Globally, strong jobs data in the US last week led investors to pare bets on rate cuts by the Fed in November. Nonfarm payrolls in the US rose by 254,000, the most in six months, while the unemployment rate fell to 4.1 per cent, and hourly wages increased.

The payroll report eased concerns that the labour market is deteriorating in the US; however, it dashed hopes for sizeable rate cuts. The 10-year US bond yield rose to 4 per cent for the first time since July 31.

Last week, US Fed Chair Jerome Powell indicated that the Fed would lower rates if incoming data showed that the US economy slows less, suggesting a slower pace of rate cuts.

The Nifty IT index rose by 0.6 per cent as the jobs report alleviated concerns about the US economy slipping into recession, as information technology firms earn a considerable portion of their revenues from the US.

“The US jobs numbers were strong, and a few weeks ago, a Reserve Bank of India rate cut was a possibility, but now it seems unlikely. A few weeks ago, liquidity was strong, but that’s no longer the case, and valuations will need to adjust if earnings are going to moderate,” said Andrew Holland, chief executive officer of Avendus Capital Public Markets Alternate Strategies.

Sharp foreign outflows have stoked concerns that funds are moving out of India and into China due to better valuations and an aggressive stimulus package announced by the Chinese government. However, some market experts suggest that the Chinese rally could fizzle out sooner rather than later.

“Since 2020, recoveries in the Chinese markets have lasted, on average, for two months before resuming a downtrend, which pushed them back into oversold territory. However, earnings are likely to moderate in the September quarter. Finance and some other sectors will perform well, but the drag is coming from energy and cement. Monsoons have affected consumption in certain sectors, and government spending has not picked up after elections, along with a slowdown in urban consumption,” said Amar Ambani, executive director of Yes Securities.

Brent crude prices hit $80 per barrel for the first time since August 16, 2024. Crude oil prices have been rising continuously for the past seven days as investors assess whether Israel will attack Iran’s oil trading facilities and whether the conflict will lead to the blocking of the Strait of Hormuz.

Market breadth was weak, with 3,493 stocks declining and 568 advancing. The broader Nifty Midcap 100 and Smallcap 100 indices declined by 2 per cent and 2.75 per cent, respectively.