Sensex tanks 723 pts to lowest point in 2015

Hits 2015 low amid global sell-off, rising oil prices and FII selling spree; Rs 2.89 lakh cr of investor wealth wiped out

The Indian market tanked nearly three per cent on Wednesday as overseas investors extended their selling amid risk-off trade following volatility in the global bond markets.

The benchmark Sensex dropped 2.63 per cent, or 722.77 points, to 26,717.37, the lowest level since December 17, 2014. The broader Nifty index ended at 8,097, down 227.8 points, or 2.74 per cent, the most since January 6, in its second-worst single-day fall in 20 months.

Foreign institutional investors (FIIs) offloaded shares worth Rs 1,700 crore held in Indian companies on Wednesday, adding to the previous eight-day selling tally of nearly Rs 9,000 crore. Market players said certain large foreign investors sold heavily due to redemption pressure, in the wake of weaker investor appetite due to hardening of yields on government treasury bonds in the US and Europe.

Investors’ mood also soured as crude oil prices rose to their highest level in 2015. Brent crude oil rose around $1.5 to a 2015 high of $69.14 a barrel, before cooling off slightly.

“The market was down mainly due to nervousness following a sudden increase in oil prices. There was a lack of buyers and bond yields have risen,” said Dharmesh Mehta, deputy CEO - institutional equities, Axis Capital.

The spike in oil prices is likely to add to the inflationary pressure and worsen the fiscal situation for the Indian economy.

Continued selling by FIIs has seen the market tank over 8 per cent in the past three sessions — the most among any major global market.

Experts say the sentiment towards the Indian market — which was the investors’ darling all of last year — has taken a beating due to a number of reasons. The primary reason, experts say, is the subjecting of foreign investors — the main drivers of the Indian markets — to tax uncertainties. The Centre’s unexpected demand for minimum alternate tax, or MAT, on investors has impacted FII flows coming into the country.

Also, earnings disappointments by Indian companies during the March quarter have belied the optimism shown by investors. Analysts say over three out of five companies have failed to meet expectations this earnings season.

“Too many expectations were getting built up in terms of earnings improvement or political reforms. The market had over-invested in the political trade, and is now paying the price for it,” said Shankar Sharma, vice-chairman & joint managing director, First Global.

The Indian market had rallied nearly 30 per cent in 2014 on hopes of a revival in the economy after the Narendra Modi-led BJP government came to power. Many experts, however, have started questioning the pace of reforms and the fate of key Bills, given the government’s weak numbers in the Rajya Sabha.

“The correction is due to factors like earnings failing to meet expectations and growth not picking up. The correction is an opportunity to invest. Indian equities are still compelling over the long term,” said S Naren, chief investment officer, ICICI Prudential AMC.

On Wednesday, the market breadth remained poor, with nearly four declining stocks for one advancing. Even among Sensex components, only one stock ended with gains. Shares in the capital goods, realty and banking space were the worst hit. BHEL was the worst-performing Sensex stock, dropping 6.2 per cent. ICICI Bank and Larsen & Tourbo declined nearly 5 per cent each.