Sensex and Nifty drop for seventh day running; FPIs pull out $2 billion

Benchmark indices crash 5.5% as FPIs yank out $2 billion

Benchmark indices fell for a seventh day — their longest losing streak in seven months — ahead of a key rate-setting meeting of the Reserve Bank of India as the selloff in the global markets continued. The central bank is expected to raise the policy rate by 50 basis points (bps).

The benchmark Sensex jumped over 500 points in opening trade following an overnight rebound in the US market. However, the optimism was short-lived as the US dollar’s ascent against global currencies continued. The 30-pack index closed 56,410, down 188 points, or 0.33 per cent, over previous day’s close and 756 points below its day’s high. In the past seven trading sessions, the index is down 3,310 points, or 5.5 per cent amid sustained selling by overseas funds, sparked by the decline in the rupee. Previously, the Sensex had declined for seven straight sessions in February.

In the past seven trading sessions, FPIs have withdrawn over $2 billion from the domestic markets. Their monthly buying tally has turned negative in September after two months of positive flows.

"Dollar has strengthened against a host of currencies, including the rupee. Bond yields are rising sharply. At the moment risk-adjusted return that investors expect from equity is not getting met. The aggressive statements by Fed regarding keeping higher rates for a longer time are stoking fears of a recession and triggering risk-off mode amongst investors. India cannot be immune to global headwinds," said Siddhartha Khemka, head of retail research, Motilal Oswal Financial Services. 

The US markets rose nearly 2 per cent on Wednesday after the Bank of England (BoE) suspended a planned start of its gilt selling programme and instead temporarily begin buying long-dated bonds. The move calmed word markets but the selloff in equities and bonds once again resumed on Thursday.

"The initial upticks of the domestic market were short-lived due to its weak global peers and declining rupee. As the yield differential between India and the US fell to a multi-year low of 348 bps, foreign investors are still departing from the Indian market. Amid the ongoing global trend of aggressive rate hikes, markets are braced for a 50 bps increase by the RBI. Investors eagerly await the central bank’s intervention to aid bank liquidity, curb currency depreciation, and provide updates on its monetary stance & GDP outlook," said Vinod Nair, Head of Research at Geojit Financial Services.

On Thursday, market breadth was mixed with 1,806 stocks advancing and 1,633 declining. The broader market Nifty Midcap 100 and the Nifty Smallcap 100 indices managed to eke out gains of 0.4 per cent and 0.63 per cent, respectively. The India Vix index cooled off 4 per cent to finish at 21.3. Asian Paints fell the most among Nifty components at 4.72 per cent followed by Hero MotoCorp, which dipped 2 per cent. Shree Cement, which will be expelled from the Nifty 50 index from Friday, rose 3.5 per cent. ONGC and Hindalco rose over 3 per cent each.