After nose-diving over 1,200 points in early trades in a knee-jerk reaction to weak global cues, the benchmark BSE Sensex recouped some losses to settle above the crucial 34,000-mark on Tuesday. The bellwether index was still down over 560 points from its previous close
Asian markets, including Japan’s Nikkei that plunged 4.7 per cent and Hong Kong stocks which plummeted 5.1 per cent, also responded to a sharp selloff on Wall Street overnight. US stocks tumbled as interest rates headed higher amid concerns of returning inflation.
The domestic market trimmed intraday losses in mid-afternoon trade as trading in the US index futures indicated a positive opening for the US stocks later in the global trading day. Later, the US markets appeared to be staunching losses as S&P 500, Nasdaq Composite and the Dow were up more than 1 per cent in morning trade. Taking cues, European shares too rallied.
Many analysts feel the global selloff is due to spike in global bond yields, resulting in a knee-jerk reaction in the domestic market. However, towards close, the domestic market recouped some losses led by value buying on earnings growth expectations.
“Indian MF and HNI’ were sitting more on cash as NSE increased the margins to as high as 70 per cent pre-budget. They got an opportunity as fundamentals of Indian economy are intact and solid results season is further confirming the growth. Therefore, post around 9 per cent correction in Nifty the funds started buying which led to huge recovery in the markets. We think markets would take some breather here before they move to next upward move,” said Purvesh Shelatkar, senior VP at Centrum Broking.
Despite heavy selling pressure, some stocks managed to make gains, with over 30 companies hitting their 52-week high levels on Tuesday and gains in bluechips such as Bharti Airtel and Tata Steel cushioned the fall in the broader market to some extent.
As many as 32 stocks hit their 52-week high on BSE, including Polaris Consulting & Services. Among the 30-share Sensex stocks, four companies were trading in green led by Tata Steel, Bharti Airtel, Larsen & Toubro and ICICI Bank.
Porinju Veliyath of Equity Intelligence India said that bull market is basically related to economic growth that is going to sustain, which is the big picture about India. “We have to be rational. Markets coming down are bullish, because you are getting more attractive valuations; it is not the other way. In India we are structurally changing into positive mode as an economy,” he added.
Analysts said hopes of a short-term reversal have arisen looking at the fact that the indices did not close at their intra-day lows. The actual close of DJIA (Dow Jones industrial average) will be keenly watched for cues. On upmoves, 10,723 (being 50 per cent of the fall) could provide strong resistance.
The sharp fall in early trade followed a harrowing day for investors on Monday in the US, where the Dow plummeted 1,175 points, or 4.6 per cent. It was the index’s biggest event point decline in a single day.
Analysts said the intense selling in the Indian market can also be attributed to profit-booking after the recent rally and ahead of the implementation of long-term capital gains tax on equities. Investors were also worried about rising bond yields and lingering concerns over tighter monetary policy ahead of RBI meeting.
All the sectoral indices on the National stock Exchange (NSE) lost over one per cent in trade, with select healthcare, PSU banking and IT stocks losing in the range of 3-5 per cent.
The Sensex shed 561.22 points or 1.61 per cent at 34,195.94, the Nifty 50 index slumped 168.30 points or 1.58 per cent at 10,498.25. Both indices hit their lowest closing levels in more than one month. Nifty stocks lost most of the gains made during the past month following the three-day rout.
Investor loss is estimated around Rs 5 lakh crore in just two trading sessions, with the stock market rout extending over budget proposals to tax equities coupled with a global sell-off.
Vaibhav Agrawal, head of research, Angel Broking, said: “The crack was obvious in the SGX Nifty in early trades after the Dow fell by more than 1,000 points on Monday and the Nikkei fell as much as 7 per cent during trades. While the concern over the LTCG tax continues, the correction on Tuesday was driven more by a spike in global bond yields.”
According to provisional data, foreign portfolio investors, who had been making persistent purchases, net sold shares worth Rs 1,263.57 crore, while domestic institutional investors bought shares worth a net Rs 1,163.64 crore on Monday.
— With inputs from agencies