Domestic Indian stocks declined for a third day in holiday-thinned trading as the threat of slower global growth and its impact on corporate earnings added to uncertainty at the end of a tough year.
The BSE Sensex dropped 0.8 per cent, or 272 points to 35,470, with bulk of the losses coming in the last hour of the session. Volumes were about 40 per cent below than the 30-day average. The NSE Nifty 50 Index also retreated 0.84 per cent, or 90 points to end at 10,663.5.
Markets globally were roiled last week as renewed US-China tensions and concern about a partial US government shutdown added to negative narratives in the wake of the Federal Reserve’s pledge to continue reversing stimulus of the past decade.
“We are neutral on stocks at these levels as a slowdown in world economy can impact EMs and bring more volatility,” said Anu Jain, partner at IIFL Investment Managers. “Elections in India are the biggest hangover on the markets and the US-China trade war is a key global issue to impact equities.”
On Monday, foreign institutional investors sold shares worth Rs 5.8 billion, while domestic institutional investors bought shares worth Rs 1.86 billion.
“It’s a period of accumulation for investors with key risks being global liquidity tightening and trade wars,” said Viral Berawala, chief investment officer at Mumbai-based Essel Finance AMC.
Sensex and Nifty volumes were at least 35 percent lower than the 30-day mean.
Sixteen of the 19 sector gauges compiled by BSE fell, led by a gauge of property developers. An index of software exporters rose the most. Two-wheeler maker Hero MotoCorp fell the most among Sensex members, dropping 4.7 per cent, after its shares were downgraded to sell at Goldman Sachs.
At risk in India is a strengthening earnings picture that has seen profits for Nifty 50 companies grow in six of the past eight quarters, according to Bloomberg data.
Earnings at the Nifty companies are estimated to rise an average 19 per cent this fiscal year that started April 1, and 22 per cent next year. That compares with a 16 per cent growth in the last year, according to Bloomberg data.
“We see potential risks from a global slowdown and China-U.S. trade issues, oil prices and national elections,” Kotak Institutional Equities analysts led by Sanjeev Prasad wrote in an investor note on Dec. 20.