The Indian markets tumbled for the fourth straight day on Friday, posting their worst weekly losses in nearly two months, as rising bond yields prompted investors to trim their exposure to risky assets.
A sharp fall in US stocks, which caused the tech-focussed Nasdaq Composite index to slip into correction territory, dampened investors’ mood with markets from Asia to Europe posting losses.
The Sensex on Friday declined 427 points, or 0.72 per cent — extending its four-day sell-off to 2,272 points, or 3.7 per cent. The 30-share index ended the week at 59,037, with a decline of 3.6 per cent — the most since late November. The Nifty on Friday ended at 17,617, down 140 points, or 0.8 per cent. Friday’s close was the lowest for both the indices since December 31.
Foreign portfolio investors sold shares worth Rs 3,148 crore on Friday, taking their two-day selling tally close to Rs 8,000 crore. Buying by domestic institutions was muted.
While the yield on the 10-year US Treasury retreated from 1.9 per cent on Wednesday to below 1.8 per cent, it did little to improve sentiment.
Investors’ focus has now shifted to a broad reversal of the post-pandemic easy monetary policy. Many expect the US Federal Reserve to hike interest rates four times this year due to concerns about rising inflation.
“Bond yields surged globally as the Fed’s hawkish stance to contain high inflation prompted investors to prepare for a faster withdrawal of the easy monetary policy,” said Jitendra Gohil, director-head of equity research, wealth management, Credit Suisse.
The surge in oil prices has proved to be another headwind for domestic equities. Earlier in the week, Brent crude prices breached $88 per barrel— the most since 2014 — amid rising geopolitical tensions.
Experts say the December quarter earnings so far have been disappointing, adding to investors’ woes. The combined net profit for companies that had declared their results until Thursday grew by 10.4 per cent — the slowest in the last five quarters. The aggregate top line growth too has failed to meet expectations. The subdued earnings could pinch investors as the Street is hoping for sharp growth in earnings over the next several quarters to justify premium valuations.
“Rate hike worries amid rising inflation, elevated bond yields, ongoing geopolitical tension, and surge in oil prices are weighing on sentiment. As the recent earnings failed to excite the market, the earnings outcomes in the coming week will be a key factor in determining investor confidence,” said Vinod Nair, head of research at Geojit Financial Services.
“While faster-than-expected tightening by the Fed may bring some uncertainty and lead to some valuation correction for equities, we do not anticipate Indian equities to de-rate materially in the next few months given our constructive view on Indian macro and marked improvement in corporate fundamentals,” added Gohil.
Only eight out of the 30 Sensex components ended with gains on Friday. Bajaj Finserv fell the most at 5.4 per cent after its quarterly profits dropped, followed by Tech Mahindra, which declined 4.4 per cent. Tata Steel and Bharti Airtel fell 3.2 per cent and 2.83 per cent, respectively. Hindustan Unilever gained the most at 2.7 per cent after its December quarter profits beat analysts’ estimates. Overall, 926 stocks advanced and 2,466 declined on the BSE.
Market players are now pinning their hopes on the Union Budget to stem the market fall.
“We hope that the Union Budget could bring about some confidence and stability in current volatile markets. Policy reforms and government spending on infrastructure development will boost economic recovery, giving ample opportunities to retail investors for growth,” said B Gopkumar, MD & CEO, Axis Securities.