A week of global shocks for markets

The benchmark BSE Sensex on Thursday declined over 470 points, or 1.29%, to close at 36,093.47 as global concerns revived a slowdown fear, weighing on investor sentiment. With no positive trigger locally, shares from the banking, information technology, and metal sectors dragged down the market. The broader Nifty 50 closed over 135 points, or 1.25%, lower at 10,704.8. The S&P BSE MidCap and SmallCap closed lower by 153 points (-1.15%) and 190 points (-1.48%), respectively.

At the beginning of the week, the crude oil price spiked because of drone attacks on Saudi Aramco’s oil refinery during the weekend, which hurt the Indian equity indices. At the end of trading on Tuesday, the Sensex lost over 903 points from Friday's close of 37,384.99 points; the Nifty 50 also lost 258 points during the same period. In percentage terms, the Sensex and Nifty 50 declined 2.42% and 2.33%, respectively. The impact on the S&P BSE MidCap was not much different, which fell 278 points (-2.04%). The S&P BSE SmallCap, too, registered a fall of over 157 points (-1.21%) between Friday’s and Tuesday’s close.

The global shocks for the Indian equity indices are far from over. The latest jolt came in the form of 25-basis point (100 basis points make a per cent) reduction in interest rates by the U.S. Federal Reserve, for the second time this year. Taking cues from the U.S. rate action, the Asian markets saw volatility in their stock indices as well as currencies. And Indian markets also reacted in tandem. The Indian rupee traded in the range of 71.375–71.070 a dollar.

On the equities’ front, compared to the Wednesday’s close of 36,563.88, the S&P BSE Sensex fell over 576 points (-1.58%) to touch the day’s low of 35,987.8 points. The Nifty 50, fell over 170 points (-1.57%) to touch the day’s low of 10,670.25, from Wednesday's close of 10,840.65. At the day’s low of 13,247.7 and 12,675.56, the S&P BSE MidCap and SmallCap registered a fall of over 191 points (-1.43%) and 218 points (-1.7%), respectively.

The news of a rate cut by the U.S. Fed, according to Ajit Mishra, vice president–research at Religare Broking, failed to provide any solace, as it was largely on expected lines. “Local cues dictated the market trend wherein the report on low tax collection and IMD report on floods damaging crops dented the sentiment," he said.

Mishra is of the view that markets are in bad shape and the situation may deteriorate further in the absence of any major positive. “The recent fall indicates prevailing uneasiness among the participants, who are hoping for some major announcements from the government to arrest the slowdown signals,” he adds.

The current month has seen a lot of volatility across key indices. Until September 19, the gap between the month’s low and high was 1,447 points for the benchmark Sensex; 414 points for the Nifty 50; 611 for the S&P BSE MidCap; and 834 points for the S&P BSE SmallCap.

Foreign portfolio investors (FPIs) have been net sellers in equities to the tune of ₹4,833.21 crore ($669.38 million) until September 19. The sell-off was marginally higher than the outflow of ₹4,646.35 crore ($641.22 million) during the corresponding period last year. However, mutual funds have been net buyers in equity to the tune of ₹6,290.52 crore until September 18. During the corresponding period last year, they were net buyers to the tune of ₹4,968.92 crore.