Over Rs 9 trillion wiped out as Sensex and Nifty crash over 2% each

Tensions in West Asia, FPI selling lead to biggest 1-day fall in 2 months

Equity benchmark indices Sensex and Nifty tanked over 2 per cent each on Thursday as investors trimmed their risk exposure amid escalating tensions in West Asia. Losses across all sectors weighed heavily on key indices.

The markets also came under pressure on concerns over foreign portfolio investors (FPIs) pulling out from India to invest in China, where valuations are attractive, analysts said.

Investor’s wealth worth Rs 9.8 trillion was wiped out as the market capitalisation (mcap) dropped to Rs 465 trillion.

Sensex declined 1,769 points to end at 82,497, a 2.1 per cent decline. The Nifty 50 index plunged 547 points to settle at 25,250, a 2.1 per cent drop.

 

Nifty posted its third biggest fall in the year after June 4 and August 5, when the shock verdict of the Lok Sabha elections and concerns over the reversal of yen carry trade and disappointing jobs data had rattled markets, respectively.

For Sensex, this was the fourth-worst decline this year.

Domestic equity benchmarks were also the worst performing global equity indices. India VIX, a gauge measuring market volatility, rose 10 per cent and ended the session at 13.2. 

Iran's missile attack on Israel has left investors across the globe worried and guessing about Israel's response. 

Israel bombed Beirut overnight, retaliating for the death of its eight soldiers who died in a battle against Hezbollah. The latest round of tensions where Israel is pitted against Iran directly have raised concerns about its impact on oil prices and global geopolitical stability. 

The region accounts for about a third of oil supplies and will have a cascading effect if oil facilities or supply routes are attacked.

Crude oil rose for the fifth consecutive session, trading at $75.4 per barrel. In the past five sessions, Brent crude has risen 6 per cent.

"Foreign funds might want to get to China quickly, so they must reduce the weightage in India. When the flows return to emerging markets, they will top up India or China, depending on the market conditions. Our markets were overbought anyway. Crude prices rising is a negative for India, but we have been buying from Russia; maybe the expectation of RBI cut next week is off the table now,” said Andrew Holland, CEO of Avendus Capital Alternate Strategies.

After recording fresh record highs on Thursday, the Nifty has declined over 4 per cent from its peak. 

Besides global headwinds, the RBI's monetary policy decision this month, the macro data from the US, which will give cues of the future of rate cuts and quarterly results in India, is expected to determine the trajectory of the markets.

"The result season is unlikely to be great. But if RBI is to cut rates, it will be a positive. The expectations will be that things will start to pick up, that interest rates are coming down, that people will have more money to spend, and that companies will invest," Holland explained.

Reliance Industries, which fell 3.9 per cent, was the biggest contributor to Sensex's decline. In the last three days, Reliance Industries had declined 7.8 per cent with West Asian tensions creating uncertainty for its oil refining business. 

Market breadth was weak, with 2,881 stocks declining and 1,107 advancing.

Among sectoral indices, the Nifty Realty Index declined the most at 4.4 per cent, followed by Nifty Auto and Oil & Gas at nearly 3 per cent each.

"I don't see a huge fall from here as the domestic liquidity support is intact. Domestic flows will go into larger names, ones that haven't moved in a long time. Any midcap which rallied and has a 30-40x P/E could see a correction," said Amar Ambani, executive director of Yes Securities.