Indices decline for third day; FPIs sell shares worth Rs 1,507 crore

But their domestic counterparts buy Rs 1,373 crore of stocks

Indian markets fell for a third day in a row on Friday as foreign investors continued to take money off the table as economic uncertainty caused by the US Federal Reserve’s tightening of monetary policy and Russia’s war in Ukraine.
 

The benchmark Sensex closed at 57,362, a decline of 233 points or 0.41 per cent. The Nifty ended the session at 17,153, a decline of 70 points or 0.4 per cent. Both the indices posted their second straight weekly loss.
 

Foreign portfolio investors (FPIs) sold shares worth Rs 1,507 crore, while their domestic counterparts bought shares worth Rs 1,373 crore.
 

The Indian markets underperformed the MSCI Asia and MSCI Emerging Market this week, whose returns were boosted by the gains in the Chinese market following Beijing’s pledge to introduce market-friendly policies.
 

Rising oil prices combined with rich valuations have made Indian equities less attractive than those of regional peers. Brent crude was trading at $116 per barrel at 7 pm on Friday.

Domestic oil marketing companies (OMCs) lifted fuel prices for a third day in the week, stoking fears of inflation. The yield on India’s 10-year government bonds edged higher and the rupee depreciated tracking high global crude oil prices.
 

“The Indian equity markets continue to be in a grind, influenced by and reacting to incremental news flow on the global front, especially related to the geopolitical situation and Fed rhetoric.

The two key challenges for the markets in the near term are the persistent inflationary pressures and the rising bond yields. The recent rise in bond yields can have implications for flows and equity valuations,” said Milind Muchhala, ED, Julius Baer.
 

Investors continue to assess the impact of the Russia Ukraine war, which has been raging for over a month now. The war has led to a surge in commodity prices, including oil. Commodity prices were already on the rise as demand picked up after countries across the globe eased Covid-related restrictions but supply side issues persisted.

“While the Russia-Ukraine war has limited direct impact on the Indian economy given our lower dependence on imports from these countries, higher commodities inflation poses a key risk both in terms of macro parameters such as balance of payments and inflation as well as corporate earnings estimates on account of higher input costs,” said Shibani Kurian, senior executive vice president and head of equity research, Kotak Mahindra Asset Management Company.

 

“India is a net importer of crude oil and it is estimated that every 10 per cent increase in crude oil prices impacts the current account deficit by about 30 basis points (bps) and consumer inflation by about 40 bps and GDP by 20bps, all else remaining constant.

However, unlike the past, this time around there are a few offsets from a domestic stand point which includes high forex reserves, strong FDI flows and improvement in export growth,” Kurian added.
 

Experts said investor sentiment has been hit by the US Fed’s pledge to fight inflation at any cost.

At the start of the week, the US Fed Chief Jerome Powell said if required, the central bank would raise rates by more than 25 basis points more than once.

Powell also reiterated that the central bank would start reducing its balance sheet by May. The move led to hardening of US bond yields and a flight to safe assets.
 

Barring six, all Sensex constituents declined. Titan was the worst-performing index stock and declined 3.6 per cent. Tech Mahindra fell 2.3 per cent, and Maruti fell 1.8 per cent. Most sectoral indices also ended with losses with the consumer durables index decliningthe most at 2.3 per cent.