Sensex dips 380 pts on global headwinds

Worry over Fed meet, China slowdown, Paris attack add to the existing tension on earnings recovery

Indian equities fell 1.3 per cent on Wednesday, as uncertainty ahead of the Federal Open Market Committee (FOMC) of the US central bank next month, as well as worries over the Chinese economy and fresh firing in Paris, weighed on sentiment. A sharp fall in information technology (IT) stocks also dragged down the indices. The 30-share benchmark Sensex of the BSE exchange slid 1.5 per cent or 381 points to 25,482, its biggest single day's percentage fall since September 22. The National Stock Exchange's 50-share Nifty fell 105 points or 1.4 per cent to 7,731.

China's benchmark indices fell for a second day after President Xi Jinping said the country's economy faced "considerable downward pressure". And, firing was reported anew in Paris early on Wednesday, as special police forces launched an operation to catch suspects in the recent terrorist attacks.

"News of fresh security concerns in Paris triggered selling pressure across the globe. Depreciation in the rupee against the dollar also kept the sentiments down," said Jayant Manglik, president, retail distribution, Religare Securities.

Better than expected US jobs data, issued earlier this month, has increased the probability of the central bank, the Federal Reserve, raising interest rates in December. "Investors might have lightened their positions ahead of the release of the minutes of the FOMC meeting. Investors fear the language of these minutes might signal a higher probability of a rate hike in December," said Sanjeev Zarbade, vice-president at Kotak Securities.

The global sentiment has spurred foreign investors to pull out more money from the Indian market. On Wednesday, foreign institutional investors (FIIs) sold shares worth Rs 768 crore, while domestic institutional investors bought shares worth Rs 759 crore, provisional data shows. In November so far, FIIs have sold shares worth Rs 3,300 crore, paring year to date purchases to about Rs 22,000 crore.

In August, foreign overseas had pulled out a record Rs 17,200 crore from the Indian market; in September, they took out Rs 5,695 crore. This was followed by a net purchase of Rs 5,064 crore in October. The Sensex had slid 5.9 per cent in the three months to September, its steepest quarterly loss since 2011.

Key Asian indices ended in the red on Wednesday, with the Shanghai Composite and Straits Times losing one per cent each. European indices were trading in the red, with the FTSE 100, DAX and CAC 40 trading down between 0.2 per cent and 0.7per cent at 5.30 pm, India time.

Back home on Wednesday, the market saw 1,046 advances and 1,615 declines on Wednesday. As many as 26 of the 30 Sensex components ended in the red. Eleven of the 12 BSE sectoral indices ended in negative territory, with the BSE Bankex and BSE IT declining the most, by nearly two per cent and 2.3 per cent, respectively.

Shares of IT companies came under pressure on Wednesday on concerns over weaker than usual revenue growth this quarter and concerns over issue of H-1B visas by the US government. Infosys Technologies fell 3.9 per cent, highest among the IT bellwethers. Tata Consultancy Services closed lower by 1.6 per cent, while HCL Technologies and Wipro were down one per cent and 0.2 per cent, respectively.

Market experts said the government would have to proceed with its stated reform agenda to spur growth and revive investor confidence, to ensure India withstood the global turbulence triggered by fear over a China slowdown and an interest rate increase by the US Fed. Analysts have started downgrading the Indian markets due to delay in an earnings recovery.