The domestic equity markets dropped on Tuesday, joining other global peers, after a string of bad news hit sentiment, prompting investors to seek refuge in safe-haven investments such as gold. Continuing political unrest in Hong Kong, a market rout in Argentina, and trade concerns between the US and China kept investors on tenterhooks.
The Sensex fell 624 points, or 1.67 per cent, to end at 36,958, while the Nifty 50 index dropped 184 points, or 1.7 per cent, to close at 10,926. If not for a 10 per cent jump in shares of Reliance Industries, the Sensex would have dropped nearly 1,000 points. Shares of India’s second-most valuable company rose most in nearly a decade, adding more than Rs 71,000 crore to its market capitalisation, as investors lapped them up on the company’s plan to aggressively reduce debt. Its market cap now stands at Rs 8.08 trillion.
Besides Reliance Industries and Sun Pharma, most other Sensex components ended with losses, as foreign portfolio investors (FPIs) continued to take money off the table amid an uncertain global environment.
The benchmark indices had shot up around 2 per cent in the preceding two sessions on hopes that the government would announce measures to address investor concerns amid a series of meetings between the finance ministry and various industry participants.
“There is increasing uncertainty in the global markets, thanks to Argentina, rising trade tensions, a messy Brexit process, and the ongoing Hong Kong stand-off. All these point towards further risk-aversion and, therefore, hopes of robust inflows into India seem misplaced,” said U R Bhat, director, Dalton Capital India. “In short, there is no market positive news flow, whether domestically or internationally.”
The volatility in global markets comes at a time when India’s economy as well as markets have hit a rough patch. Also, corporate earnings of most key companies have left investors further disappointed.
“Weak corporate profits are a big headwind to growth. India, despite clocking one of the fastest economic growth, has not seen a commensurate profit for its businesses,” said Navneet Munot, chief investment officer, SBI Mutual Fund.
Since the Union budget, the benchmark indices have declined nearly 7 per cent amid continuous selling by overseas investors. In the past one month, FPIs have pulled out nearly Rs 25,000 crore from the equities market, spooked by an increase in tax surcharge announced in the Budget.
On Tuesday, FPIs sold equities worth Rs 638 crore, while domestic institutional investors bought shares worth Rs 201 crore.
Market players said the government needed to announce market-friendly measures to revive investor sentiment.
“Along with a reduction in the cost of capital, there is an urgent need to restore confidence amongst the business and investors community. The animal spirits, for both lenders and borrowers, must revive, and that can only happen by two set of forces; buoyancy in the global growth or by stability and predictability in fiscal policy environment,” said Munot.
The market breadth was weak on Tuesday, with nearly two stocks declining for every one advancing on the BSE. Financial and automobile stocks fell the most. HDFC, which fell 5.1 per cent, and HDFC Bank, which declined 2.7 per cent, were the biggest drag on the index. Apart from Reliance Industries, Sun Pharma gained 3.7 per cent after its earning beat expectations. Telecom stocks tumbled on fears that Reliance Industries’ new initiative in broadband and telecom space will hurt revenues.