Markets log biggest decline in two months as FPIs resume selloff

IT, auto stocks see steepest fall, 5 Adani group firms settle higher

Benchmark indices logged their worst decline in nearly two months as foreign portfolio investors (FPIs) resumed sell-off, triggered by uncertainty over the US interest rate outlook after the latest inflation data showed a stubbornly strong print.

 

The Sensex dropped 1,190 points, or 1.5 per cent, to close at 79,044, while the Nifty 50 index declined 361 points, or 1.5 per cent. The fall was the biggest single-day decline for both indices since October 3 and wiped out Rs 1.5 trillion in market capitalisation. The India VIX, a gauge of market volatility, rose by 3.9 per cent to 15.2.

 

FPIs sold shares worth Rs 11,756 crore, according to provisional data provided by stock exchanges. This was their third biggest single-day sell-off and the worst since October 3. Domestic institutional investors (DIIs) bought shares worth Rs 8,718 crore, helping cushion the blow.

 

 

Experts said the market outlook has been weak and recent gains posted by the markets were on account of one-off events such as the Maharashtra election verdict and MSCI rebalancing, which helped channel nearly Rs 10,000 crore into domestic equities. 

 

 

"FPIs have made some readjustments based on new weights in the rebalanced MSCI index, which may have led to recent buying. However, the reasons for continued selling still persist. These are the rising US dollar and muddled interest rates outlook because of US President-elect Donald Trump's policies. This is prompting FPIs to move money out of the markets,” said UR Bhat, co-founder of Alphaniti Fintech.

 

The US personal consumption expenditures price index rose 2.8 per cent from October last year and 0.3 per cent from a month earlier, raising concerns that the US monetary policymakers will proceed gradually with interest rate cuts. Investors are also gauging the impact of Trump's policy measures and its impact on price pressures.

 

The figures give credence to the recent comments by many Fed officials that there's no rush to cut interest rates so long as the labour market remains healthy and the economy continues to power ahead.

 

The IT index fell the most at 2.4 per cent, followed by the auto index which declined 1.6 per cent. Uncertain US outlook impacts IT spending, while reports of hefty emission penalties impacted auto stocks.

 

Infosys, Reliance, and HDFC Bank contributed most of the losses to Sensex. Infosys declined 3.5 per cent and was both the worst-performing Sensex stock and the biggest drag on the index. Reliance Industries declined 1.7 per cent and HDFC Bank fell 1 per cent.

 

Domestic markets have come off as much as 10 per cent from their record highs in September due to disappointing corporate earnings and sustained FPI selling.

 

The FPI outflows were initially in response to China's stimulus measures to strengthen its ailing economy. The victory of Trump in the US elections brought a fresh set of concerns as his policy promises are likely to drive up prices in the US, dimming the appeal for other markets. The dollar has strengthened, and investors are moving money to safe assets like the 10-year US bonds.

 

Barring one, all the Sensex stocks declined, while only four out of 50 Nifty components managed to eke out gains. The overall market breadth was positive with 2,127 stocks advancing and 1,815 declining. The Nifty Midcap 100 and the Nifty Smallcap 100 managed to end with marginal gains.

 

"The consolidation phase in the market is likely to continue in the near term. There is no room for high optimism. A strong dollar is a negative for emerging markets; therefore, FIIs are unlikely to turn into aggressive buyers,” said VK Vijayakumar, chief equity strategist of Geojit Financial Services.

 

Meanwhile, shares of five of the 11 listed Adani group firms ended higher on Thursday, with Adani Total Gas soaring nearly 16 per cent, in an otherwise bearish stock market. Adani Energy Solutions and Adani Green Energy hit their highest trading permissible limit for the day, as concerns around US charges eased.    HDFC Bank mcap hits Rs 14 trn 

HDFC Bank’s market value hit Rs 14.03 trillion during intraday trade on Thursday, solidifying its place as the country’s most valuable lender. After hitting an all-time high of Rs 1,836, the stock closed at Rs 1,793, down 1 per cent over the previous day’s closing. 

 

At the last close, HDFC Bank’s market cap stood at Rs 13.7 trillion, making it India’s third-most valuable company after Reliance Industries (mcap Rs 17.2 trillion) and Tata Consultancy Services (Rs 15.4 trillion). From October lows, shares of HDFC Bank have rallied more than 10 per cent, driven by global index provider MSCI’s move to increase its weight in its global indices.    

Union MF forays into factor investing  

Union Mutual Fund (MF) on Thursday announced its entry into factor-based investing with the launch of Union Active Momentum Fund.

The fund follows a rules-based investing strategy, wherein factors like historical price performance, volatility of returns, relative strength, liquidity will dictate the stock selection.  

“Being actively managed, the fund manager will monitor the portfolio periodically and will have the liberty to override the model in case of exceptional situations in addition to rebalancing the portfolio at least once a quarter,” it said in a release.