The sell-off in domestic markets resumed on Thursday, with the benchmark Nifty ending at a seven-month low. Slowing growth and turmoil in the financial sector continued to plague investors. The Sensex ended 470 points or 1.3 per cent lower at 36,093 — its lowest close since March 1.
The Nifty dropped 136 points or 1.25 per cent to close at 10,705 — its lowest since February 19. Both indices have declined more than 3 per cent this week, amid a sharp pullback by overseas investors.
Experts said foreign portfolio investor (FPI) outflows could continue, because the US dollar was seen firming up following the US Fed’s decision to lower interest rates. FPIs sold shares worth nearly Rs 900 crore, extending their record selling for the quarter.
Market players said most economic indicators — the latest being dismal advance tax collections — have been hurting sentiment. At the start of the week, a record spike in oil prices following the attack on Saudi Arabia’s key oil facility, spooked investors.
“The market is unlikely to revive until there is some confidence on earnings growth. Without that, fresh investments will continue to wait on the side-lines," said U R Bhat, director, Dalton Capital India.
Non-banking financial companies (NBFCs), including Indiabulls Housing Finance, came under heavy selling pressure on Thursday, after concerns over the realty sector resurfaced.
“NBFCs are having a tough time with continuing credit downgrades. They are unable to tap the commercial paper market, and bank finance is difficult to come by,” said Bhat.
Experts said that investors fear a flare-up in tensions in West Asia, which could keep prices elevated and hurt India’s macroeconomic prospects given its high dependence on imports.
“The markets are in bad shape, and we feel the situation may deteriorate further in the absence of any major positive. The recent fall indicates prevailing uneasiness among participants, who hope for some major announcements from the government to arrest the slowdown,” said Ajit Mishra, vice-president (research), Religare Broking.
Market players said they were waiting for bold reforms, such as streamlining of labour laws and privatisation, to revive the economy.
“The markets don’t have a clear signal about what the government is doing about the economy. The government should stop worrying about the fiscal deficit initially, and start spending to getting projects going and releasing capital. Then, it can think of selling its PSU holdings and, possibly, a rollback of capital gains tax,” said Andrew Holland, CEO of Avendus Capital Public Markets Alternate Strategies.
All 19 sectoral indices compiled by the BSE, barring one, ended with losses.
The Sensex and Nifty have corrected 10.3 per cent and 11 per cent, respectively, from their record highs in early June.
Stocks have been volatile since the beginning of the year, due to a bunch of issues. Some of these are liquidity crunch at NBFCs, rising instances of corporate default, and sluggish earnings growth. Globally, trade tensions between the US and China, coupled with fears of recession, have added to investors’ woes.