Indian markets fell nearly 2%, its highest fall in seven months, as investor confidence was shattered by incessant selling in the past week. Equity markets opened flat on Monday but immediately fell in the red for the fourth consecutive session, finally ending the session with a gain of 2%. The broader indices also mirrored the benchmark and closed down nearly 3%. Barring metals, most sectors witnessed a selloff with a decline of 2-4%. Volatility index, India VIX skyrocketed – up 17.5% to 17.5 levels.
According to analysts, the key factors driving the market down were cancellation of Reliance-Aramco deal, withdrawal of Agri-Agriculture Acts, continued selling by FIIs and disappointment over Paytm’s listings which affected the market sentiments and there was a free fall in the market. .
Indian as well as global markets were already feeling the heat amid inflationary pressures, which raised concerns that the US Fed may tighten policy rates faster than expected. Domestically, with higher-than-expected inflation in October, upside risks and the need for policy normalisation, analysts expect the RBI to start tightening up soon.
The Sensex fell 1.96%, closing the highest since April 30 or 1170.12 points at 58465.89, while the Nifty fell 1.96%, closing at 17416.55, the biggest drop since April 12 or 348.25 points. In intraday, Sensex fell up to 2.72% or 1624.09 points while Nifty shed 2.73% or 484.35 points.
Both Sensex and Nifty fell for the fourth consecutive session and fell around 3.71% and 3.82% respectively.
According to Mohit Nigam, PMS Head, Hem Securities, the reason for today’s decline is not just one factor but several factors. RIL withdrawal of O2C deal with Saudi Aramco, recent fall in listed Paytm share influenced the market sentiment. Also the rollback of agricultural laws has cast doubt on future economic reforms, the corporation said.
Reliance Industries was the biggest drag, having lost over 4% after scrapping a proposed deal to sell 20% stake in its oil company to Saudi Arabian Oil Co.
Paytm lost around 36.73 per cent in the last two sessions, ending 51,194 crore market value. The disappointing start has left investors stunned and focus on the rich valuations of the Indian stock market.
Analysts say a few other factors also contributed to today’s correction. The worsening situation of Kovid-19 in Europe has pushed countries like Germany and Austria into partial lockdown. The latest surge in Europe after widespread vaccination is becoming a matter of great concern for the WHO.
“Globally, the stagflation scenario in major major countries and the re-emergence of COVID-19 infections is putting risks on the economic recovery. Given the weakness in the broader market, we expect the current downside momentum to continue in the near term. But the downside, said Rajnath Yadav, Research Analyst, Choice Broking, “seems limited.
The market will take direction from the macro data which is expected to be released during the week. Domestically, India’s third quarter GDP will come on 30 November. According to a Bloomberg survey, the GDP for the July-September quarter will be 8.6% from 20.1% a quarter ago.
Globally, the US and the euro zone will release manufacturing and service data on Tuesday. Further data from the US, including minutes from the Fed’s latest meeting and initial jobless claims, will be released on Wednesday ahead of the Thanksgiving holiday on Thursday.
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