Global selloff pulls Sensex down

Benchmark indices fall 2% during the week, FIIs pulled out Rs 4,100 cr as Fed meet and likely rate rise nears

The Indian markets fell nearly one per cent on Friday,following the weakness in markets abroad due to disappointment over the European Central Bank’s (ECB’s) stimulus decision. Most Asian markets ended with losses, while European markets extended earlier losses, as most currencies slid against the dollar after the ECB announcement.

Declining for a third day, the benchmark Sensex on the BSe exchange fell 0.96 per cent or 248.5 points to 25,638.11. The National Stock Exchange's Nifty ended 1.05 per cent or 82.25 points lower, at 7,781.9.

“Weak global cues and depreciation in the rupee against the dollar led a downstart which later intensified,” said Jayant Manglik, president, retail distribution, Religare Securities.

Foreign institutional investors (FIIs) pulled out Rs 1,745 crore from the Indian market on Friday. Investors from abroad have pulled out Rs 4,100 crore during the week, with the US Federal meeting, where it is widely expected to increase rates, neared.

The benchmark indices fell a little over two per cent for the week, ending a fortnight's gaining streak.

“The week was dominated by central banks globally, as well as locally,” said Ravi Shenoy, assistant vice-president at Motilal Oswal Securities. “Policy measures will be crucial to drive the markets from here and Parliament’s functioning would be keenly watched.”

The ECB on Thursday announced a rate cut and an extension of its asset purchase programme but this left the markets—which were expecting more aggressive easing—disenchanted. About $500 billion of investor wealth was eroded across bonds and equities after the decision, said a Bloomberg report.

FIIs have pulled out about $3 bn (Rs 20,000 crore) from the Indian market since March, paring their year to date investment tally to around $3.25 bn. The Sensex this year is down 6.5 per cent and trades at a multiple of 15.2 times its estimated one-year forward earnings. The gauge is expensive compared to the MSCI Emerging Markets Index, which is valued at 11.2 times. Recovery delay in corporate earnings announcements amid a challenging macro environment has seen investors turn pessimistic towards the Indian market over recent months.

“While there understandable investor scepticism on an earnings recovery, we believe corporate earnings are likely to turn around in 2016, benefiting from an urban consumption recovery, a positive multiplier impact of the government’s push on public investments, a possible reflation in the Wholesale Price Index and a favourable base effect,” said Deutsche Bank in a note on Thursday. The brokerage expects the Indian market to climb 12 per cent from current levels over the next 12 months.