 "Sensex sheds 1.4% amid heavy FPI selling; Nifty settles at 23,086")
Indian equities plummeted on Monday amid heavy foreign portfolio investor (FPI) selling, driven by concerns about corporate earnings for the December quarter and the latest US jobs report, which signalled fewer rate cuts by the US Federal Reserve.
Brent crude prices rose up to $83 per barrel on Monday, the highest since August 12, 2024, following US sanctions on Russia, further adding to investors’ concerns.
The Sensex ended the session at 76,330, a decline of 1,049 points or 1.4 per cent, while the Nifty closed at 23,086, down 346 points or 1.5 per cent.
The total market capitalisation of BSE-listed firms declined by Rs 12.6 trillion to Rs 417 trillion.
The decline was broad-based, with the Nifty Midcap 100 declining 4.02 per cent, its biggest single-day drop since June 4, 2024, when the surprise general election results rattled markets. The Nifty Smallcap 100 fell by 4.1 per cent.
The decline in mid- and small-cap stocks was attributed to elevated valuations, with analysts warning of further selling pressure if earnings results disappoint.
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“Earnings growth is declining, valuations are elevated, and FPIs are taking cash off the table. FPIs will stop selling only when they see an end to this downturn and more reasonable valuations. And one doesn't see markets becoming radically cheaper in the next 90 days because the correction in share prices is broadly in line with the earning deceleration. We haven’t had multiple deratings of the Indian market,” said Saurabh Mukherjea, founder and chief investment officer of Marcellus Investment Managers.
Mukherjea said policy shifts in the US after Donald Trump takes over as the President will further weigh on sentiments. “Whatever action Trump takes and which further strengthens the dollar will lead to American investors retreating to America,” said Mukherjea
On Monday, FPIs were net sellers of Rs 4,893 crore, while domestic institutions bought shares worth Rs 8,066 crore. So far in 2024, FPIs have sold shares worth Rs 23,615 crore, leading to the rupee hitting a record low on Monday.
In addition to earnings concerns, a strong US jobs report has led investors to lower their expectations of rate cuts by the Federal Reserve. This pushed US 10-year bond yields and the dollar rallying. The 10-year US bond yield was trading at 4.8 per cent, the highest since November 2023, while the dollar index reached 110, the highest level since November 2022.
The upcoming earnings season, the Union Budget in February, and global events will determine the market trajectory.
“The global markets witnessed a significant selloff, prompting a similar response in domestic markets due to strong US payroll data suggesting fewer rate cuts in 2025. This has made emerging markets less attractive. Expect volatility in the near term,” said Vinod Nair, head of research at Geojit Financial Services.