Nifty's eight-week slide puts 2001 low back in sight amid oil spike

Rising crude prices, firm US yields, global risk aversion weigh on Indian equities

The market mood is being hijacked by global events, with the fall in Indian shares better explained by rising Brent crude prices, Chinese refiners, and US peace talks with Iran. The Nifty fell for the eighth consecutive week, its longest losing streak since the nine weeks to April 13, 2001, as global investors made a beeline to sell Indian equities.

 

The markets extended their slide on Thursday, with the benchmark Nifty 50 logging its worst weekly performance since March, led by automobile and metal stocks amid a global selloff. The holiday-shortened week, with markets shut on Friday for Gandhi Jayanti, also marked the index’s eighth straight weekly decline.

 

 

The National Stock Exchange Nifty 50 index closed at 22,421.95, down 0.88 per cent from the previous close, taking its weekly loss to 3.1 per cent, the steepest since the week ended March 13, when it fell 5.3 per cent. Meanwhile, the BSE Sensex fell 0.79 per cent to 71,909.7 on Thursday, losing 2.69 per cent over the week.

 

Over the eight-week run, the Nifty has shed 8.7 per cent from its August 7 close of 24,570.65. The Sensex has also fallen for eight straight weeks, losing 8.4 per cent over the period.

 

“The reason behind Thursday’s selloff is the continuously high rate of US bond yields, which is encouraging foreign institutional investors to continue their selloff in Indian equities. This is the primary reason we are witnessing a continuous, broad-based selloff. If US bond yields tend to come down, it will be positive for Indian markets and other emerging markets as well,” said Gaurav Sharma, head of research, Globe Capital.

 

The seven-week losing runs to July 2008 and April 2020 wiped out 22.1 per cent and 33.3 per cent of the index's value, respectively, while the nine-week run to April 2001 cost it 27.1 per cent. The longest such streak, 10 weeks to April 23, 1993, predates the Nifty’s official launch in April 1996 and is based on back-calculated data. 

 

Nifty Auto and Nifty Metal were the worst-performing sectoral indices, slumping 3.46 per cent and 2.35 per cent, respectively. This followed September sales data for the automotive industry, which showed a flattening of growth compared with August.

 

Mahindra & Mahindra’s sport utility vehicle sales were down 14 per cent, compared with the 50 per cent rise the company recorded in August. Bajaj Auto reported a 12 per cent fall in sales. Even tractor sales at Escorts were down. The situation has worsened because of rising Brent crude prices, as well as the possibility that interest rates could rise, affecting vehicle financing.

 

“In the past few weeks, it has only been adverse news, whether about crude oil or geopolitical issues. You have interest rates going up, and the rupee is depreciating. The record number of initial public offerings has also sucked out some amount of liquidity,” said Ambareesh Baliga, an independent market analyst.

 

Other indices that slumped heavily included Nifty Media, down 2.33 per cent, and Nifty Cement, down 2.3 per cent. Nifty Consumer Durables fell 1.91 per cent and has lost 5.25 per cent over the past five sessions, the steepest fall among sectoral indices over that period.

 

The broader markets fared worse than the benchmark. The Nifty Midcap 100 and Nifty Smallcap 100 fell 1.01 per cent and 0.97 per cent, respectively, on Thursday and are down 3.7 per cent and 3.18 per cent over five sessions, against the Nifty 50’s 2.78 per cent decline.

 

“It’s too early to take a firm view on information technology (IT), given that the sector has already been an underperformer. There could be some speculative interest or short-term investors looking for a bounce-back after the recent fall. In automobiles, however, the rise in raw material prices, coupled with signs of weakening demand, points to a setback that could play out over the medium term,” said Baliga.

 

Meanwhile, Tata group stocks came under pressure amid the latest developments in the Tata Sons tussle. Trustees Venu Srinivasan and Vijay Singh have questioned the restructuring plan for Tata Sons backed by Noel Tata, chairman of Tata Trusts, citing a lack of consultation. Srinivasan has also petitioned the Maharashtra Charity Commissioner, alleging governance issues and unauthorised communication in the Trusts’ name. Noel and his son Neville have reportedly filed around 36 caveats with the commissioner in response.

 

On the Tata stocks slide, Baliga said, “The last time it was affected was when you had the Cyrus Mistry and Ratan Tata issue. This is, in fact, worse than earlier, because at least in Mistry versus Ratan Tata, both could be called insiders. After all, Mistry was a shareholder.”