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A further decline in oil prices and the euro kept the Indian market under pressure on Wednesday. However, hope that the European Central Bank (ECB) might announce further stimulus to avoid deflationary pressures kept most markets afloat. India's benchmark indices ended 0.3 per cent lower, to their lowest levels in three weeks, led by declines in banking and metal stocks.
After dropping three per cent on Tuesday, the BSE Sensex ended 78.6 points, or 0.3 per cent lower at 26,908.82, lowest close since December 17. The 50-share NSE Nifty closed at 8,102.1, down 25.2 points, or 0.3 per cent. The Sensex made weak attempts to recover from Tuesday's 855-point fall but given the heavy selling pressure from foreign investors, it managed to gain only 65 points from the previous close during intra-day trade.
Foreign institutional investors (FIIs) sold shares worth Rs 1,074 crore, adding to their Tuesday's selling tally of nearly Rs 1,600 crore. Domestic institutions bought shares worth Rs 600 crore, net buyers for a second straight day.
"Uncertainty in the euro zone and the ECB's policy stance will be keenly watched. Trends in crude oil prices, specifically on supply, would be an important factor," said Sanjay Kumar, head of investments, PNB MetLife Insurance.
The decline in oil and other commodity prices globally is adding to the deflationary pressure in Europe, stoking hopes that the central bank will announce another round of quantitative easing at its policy meeting later this month.
European markets rebounded and US futures pointed to a positive opening recovering from the rout this week. "A tug-of-war ensued between bulls and bears and few stocks managed to keep the fall in check. With oil continuing its cooling, global market movement will dictate the proceeding. In the coming days, individual stocks will start swinging based on their results," said Amar Ambani, head of research, IIFL.
Among the index stocks, ICICI Bank and Hindalco were the worst-performing, each declining 2.5 per cent. Hindustan Unilever gained 3.5 per cent to close at Rs 802. Reliance rebounded 2.3 per cent, to end at Rs 855.4.
Indian markets had gained 30 per cent last year, led by FII inflows of over $16 billion. Most experts believe returns and overseas inflows, this year, will be muted compared to the last year due to the global slowdown and crash in oil prices.
