Sensex posts biggest drop of 2017, ends at 29,167

Weak global markets drag stocks; Benchmark indices end 1% lower

The Indian share markets saw their biggest fall of 2017 on Wednesday, amid weak global cues and continued selling in banking stocks.
 
Falling for a third straight session, the benchmark Sensex on the BSE ended at 29,167, down 317.8 points or 1.1 per cent, the most since December 2.  The Nifty50 index on the National Stock Exchange closed at 9,030.45, down 91 points or one per cent. Experts said the markets had been overheated and Wednesday’s drop should be seen as healthy. Last week, the benchmark indices had rallied nearly three per cent, with the Nifty touching record highs after the ruling party’s strong showing in state elections.
 
“In the past few weeks, there has been euphoria in the markets about the election results. This has started to settle down. The focus will now shift to corporate earnings. The fourth quarter numbers could be less than estimated in the case of blue-chip companies. However, there could be some bright spots in the mid-cap and small-cap segments,” said Sunil Shah, head of research at Axis Securities.
 
Selling was witnessed across the market on Wednesday, with the mid-cap and small-cap indices also falling close to a per cent each. Banking stocks fell for a fourth straight day, due to concerns on low credit growth and rising bad loans, amid talk of farm loan waivers.
 
The Indian markets had slipped into the red on opening, following overnight losses in US equities due to doubts over President Donald Trump’s economic policies. Major global indices were also down on Wednesday, between 0.5 per cent and one per cent.
 

“The recent rally in the global equities was due to optimism that the newly elected Donald Trump government will go for tax cuts and boost spending. However, there are now doubts over whether the Trump administration will be able to live up to expectations. This is making investors nervous,” said U R Bhat, managing director, Dalton Capital Advisors India.
 
The pace of foreign portfolio investor (FPI) buying was seen slowing. FPIs bought equities worth Rs 356 crore, while domestic institutions sold these to a tune of Rs 779.9 crore on Wednesday, showed provisional data.
 
Investors were seen trimming their exposure to banking, consumer goods and consumer durables stocks, amid reports of a slowdown in economic growth in the current quarter. Shares of Bharti Airtel fell 3.2 per cent, steepest for a Sensex company. Shares of Tata Motors, ITC and ICICI Bank fell a little more than two per cent each.
 
The index for banking stocks fell 1.2 per cent, extending their four-day losses to nearly three per cent. Punjab National Bank was down nearly four per cent, worst performing in the banking index.
 
Participants say the markets could remain range-bound for a few weeks and that the next major domestic trigger would be the March quarter result announcements.
 
The Indian markets have gained a little more than 10 per cent so far this year. Following the sharp rally, the one-year forward price-to-earnings ratio estimate of Sensex companies has gone past 20, more than the long-term average. The year, so far, has also been good for all emerging markets in terms of fund flows from foreign investors. FPIs have bought equities worth $4.6 billion (Rs 30,000 crore) in the Indian markets till now. South Korea and Brazil have had a similar flow of funds abroad.