Market crisis deepens, Nifty at 8-mth low

Index closes below 8,000, FIIs remain in sale mode

June is turning out to be a nightmare for Indian markets, as the National Stock Exchange's (NSE's) benchmark Nifty index has ended in losses on all but one trading session this month.

The 50-share index on Thursday ended below the 8,000-mark for the first time in nearly eight months.

Domestic concerns like a weak monsoon forecast, long pause in further monetary easing and sluggish corporate earnings continued to weigh on investor sentiment, even as Greek refinancing talks buoyed other global markets.

The BSE Sensex posted its biggest fall in a week, losing 469.6 points, or 1.75 per cent, from its previous close to end at 26,370.98, the lowest closing level since October 2014. The Nifty lost 159 points, or nearly two per cent, to end at 7,965.3, breaking a crucial support level. The Sensex has declined nearly 1,500 points, or 5.2 per cent, so far in June.

"While the markets have corrected, reflecting some reset of growth trajectory expectations, we believe the expectations in terms of pace of growth recovery need a further reset downwards, leading to continued near-term consolidation," said Gautam Chhaochharia, head of research, UBS. The Swiss investment bank has slashed its year-end Nifty target from 9,200 to 8,600, citing lower-than-expected earnings growth in 2014-15.

Foreign investors have sold shares worth $550 million (Rs 3,600 crore) so far this month, adding to their net-selling from last month, on concerns over retrospective taxation. On Thursday, foreign portfolio investors sold shares worth Rs 623 crore, provisional data showed.

"India, which enjoyed an overweight position so far, is beginning to feel the heat as money is moving to other markets," said Amar Ambani, head of research at IIFL. He said the market could slide further in the coming days.

"The Nifty would seek support at 7,900, a 38 per cent retracement of the entire bull run since the multi-year breakout in March 2014," he said.

The Indian market, up 10 per cent in 2015, is now down a little over four per cent for the year, as several stocks have dropped 30 per cent from their highs.

"The move below the psychological 8,000 level (of the Nifty) and testing of the 7,950-support today has unnerved investors. Domestic issues like a stalled monsoon and potential pause in the rate-cut cycle weigh heavy on investor sentiment," said Ravi Shenoy, assistant vice-president, Motilal Oswal Securities.

On Thursday, selling was seen across the board as all sectoral indices ended with losses. The banking, automobiles and consumer durables sectors saw the sharpest fall, of a little over two per cent each.

Only one of the 30 Sensex components managed to end with gains, while there were 2.5 declining shares for every advancing one on BSE.

Among the large-cap names, Reliance Industries fell three per cent, ahead of its annual general meeting on Friday. Axis Bank and Cipla fell around three per cent each.

Morgan Stanley believes a reversal of the earnings down-cycle could help in recovery of market sentiment.

Ridham Desai, head of its India equity research, said a change in the negative earnings revision trend was likely, after having reached close to its worst level. The US-based investment bank has set a target of 32,500 for the Sensex for the end of the year.