Relentless selling by foreign portfolio investors (FPIs) continued to roil the stock market on Thursday with the benchmark Sensex and Nifty indices declining for a fifth straight day. The latest US inflation data, released on Wednesday, stocked fresh concerns about the Federal Reserve’s policy response, prompting investors to dump risky assets such as stocks and cryptocurrencies.
The Sensex fell 2.14 per cent, or 1,158 points, to close at 52,930, and the Nifty50 index dropped 2.22 per cent, or 359 points, to finish at 15,808. Both indices came close to dropping below their 2022 lows — 52,843 for the Sensex and 15,863 for the Nifty, made on March 7. So far this month, the benchmark gauges have slumped over 7 per cent, eroding Rs 26 trillion of investors’ wealth.
On Thursday, FPIs sold shares worth Rs 5,256 crore, taking their month-to-date selling tally past Rs 22,000 crore. The sustained fall in the rupee against the dollar has dampened overseas investors’ sentiment, said experts. The weakening of the domestic currency eats into FPI returns and could weigh on incremental flows in the near term.
In recent weeks, the markets have struggled to find their feet amid severe headwinds such as the US Federal Reserve’s decision to aggressively hike interest rates and reduce balance sheets to curb inflationary pressures. Also, China’s strict Covid-management approach and a jump in commodity prices due to disruptions in supply chains caused by the Russia-Ukraine conflict have added to concerns around global economic growth.
“For 2022, we see global growth at 2.9 per cent (YoY), about 40 basis points (bps) below consensus and less than half of the 6.2 per cent growth last year. The deceleration is global, driven by the combination of waning fiscal impetus, tightening monetary policy, a continuing drag from Covid, persistent supply chain frictions, and, most recently, repercussions from the Russian invasion of Ukraine,” Seth Carpenter, chief global economist, Morgan Stanley, said in a note. The note added that the risks are skewed towards a bear case, which is a global recession.
The latest US inflation data showed that consumer prices in April had jumped 8.3 per cent compared with a 40-year high of 8.5 per cent in March. The numbers were higher than expected and above the Fed’s comfort zone.
Only one of the Sensex components advanced on Thursday, while 29 declined. IndusInd Bank (5.8 per cent), Tata Steel (4.13 per cent) and Bajaj Finance (3.8 per cent) fell the most. HDFC Bank (3.34 per cent) and Reliance Industries (2 per cent) were the biggest drag on the market performance.
The market breadth was weak with only 654 stocks advancing and declining to 2,711.
The Nifty Midcap 100 declined 2.73 per cent, while the Nifty Smallcap 100 fell 2 per cent. The former is down close to 20 per cent from its peak, while the latter has declined over 27 per cent, underscoring the deep pain in the market.
Shares of high-growth tech stocks – which had a phenomenal run last year amid a gush of liquidity —continued to bleed. Zomato dropped 4 per cent to a fresh low of Rs 52, while Policy Bazaar slumped 7 per cent. Both stocks are down over 70 per cent from their highs.
Experts said the downward pressure on stocks would continue but didn’t rule out a short-term technical bounce if global cues improve.
“While overall weakness is expected to continue, markets are now in oversold territory after witnessing a sharp decline in the last few trading sessions,” said Siddhartha Khemka, Head – Retail Research, Motilal Oswal Financial Services.