The Sensex and Nifty ended at six-month lows on Thursday following a sharp fall on Wall Street the previous night, triggered by worries over rising interest rates, anxiety about tech investments and trade conflict.
The Sensex plunged about 760 points, or 2.2 per cent, to close at 34001.15. The index had slipped below the 34,000-mark intraday but managed to end above the psychologically crucial level.
The Nifty ended about 225 points, or 2.2 per cent, down at 10234.65. Only nine out of the 50 Nifty stocks ended in the green.
On Wednesday night, Nasdaq Composite shed more than 4 per cent while the S&P 500 dropped 3.3 per cent led by a sharp selloff in technology shares and worries about rising interest rates, prompting US President Donald Trump to attack the Federal Reserve.
“I think the Fed is making a mistake. They are so tight. I think the Fed has gone crazy,” said Trump.
On Thursday, Nasdaq was in the green while S&P and Dow Jones had largely pared losses amid volatile trading, at the time of going to print.
The Sensex is now down 0.16 per cent for the year 2018, while the Nifty, already in the red for the calendar year, is down 2.8 per cent.
Investors Lose Rs 2.63 lakh crore
Although India fared better than other regional markets, the plunge wiped off Rs 2.63 lakh crore of investor wealth.
Since September, when the ongoing correction began, India’s market cap has been eroded by Rs 22.73 lakh crore.
The turbulence in global markets added to India’s existing woes of high oil prices, weak rupee and foreign portfolio outflows.
On Thursday, Brent crude was down 1.6 per cent at $81.78 a barrel after touching a four-year high of $86.74 last week. The rupee recovered to close at 74.12 after hitting a fresh low of 74.46 against the dollar during the day. But these developments were not enough to allay frayed investor sentiment.
The 14.7 per cent surge in India VIX, or the volatility index, to 20.54 reflected traders’ aversion to risks in the near term.
“The outlook in the near term looks hazy given the domestic and global environments,” said Navneet Munot, chief investment officer at SBI Mutual Fund.
“Crude oil prices, US monetary tightening, trade conflict and the domestic political calendar will need to be watched out for,” said Munot.
Overseas investors dumped shares worth Rs 2,869 crore on Thursday. Foreign investors sold Indian shares worth $1.3 billion, or roughly Rs 9,600 crore, in September. They have unloaded shares worth another $1.8 billion, or about Rs 13,400 crore, in October so far (excluding Thursday).
On Wednesday, the Indian stock market had posted its biggest single-day gain in six months while the rupee had snapped its seven-day losing run encouraged by the rescue package for finance companies by State Bank of India.
WORST NOT OVER
Foreign brokerage CLSA said it does not think the worst is behind for the market.
“We think otherwise. The full impact of three macro worries — rising interest rate environment, depreciating INR and political uncertainties — is not fully absorbed by the market as yet,” said CLSA. The Nifty is still trading at a 37 per cent premium to the MSCI Emerging Market index, said the brokerage. Oil and Natural Gas Corporation ended as the top Sensex gainer with a rise of 3 per cent to Rs 152.90 on reports that upstream oil producers will not be asked to share the fuel subsidy burden.