Indian equities tanked nearly 2.5% on Thursday on panic selling amid geopolitical concerns after Saudi Arabia and Arab allies launched air strikes against rebels fighting to oust Yemen’s president. Further, selling pressure on last trading day of the March derivative contracts also weighed on stocks.
Market capitalisation of BSE-listed companies fell below Rs 100 lakh crore for the fist time since mid-January.
Benchmark indices declined for the seventh consecutive session on Thursday to their lowest level in two-and-a-half months. The Sensex settled at 27,457.58, down 650 points or 2.33% – with the index sharply falling in the last one hour of trade. The Nifty ended with a 188.65-point or 2.21% cut at 8,342.15.
The market had hit a record high in the beginning of March series but failed to sustain that momentum through the series. Sensex has lost more than 8% from their all-time high of 30024.74 hit on March 4, and heading for the biggest monthly retreat since November 2011.
Indian markets mirrored a similar fall in global markets reacting to the military attacks in Yemen. Nikkei 225 index fell 1.4% while other major indices such as the South Korean Kospi, Thai index, and Hang Seng losing 0.5-1.5%.
Major European indices were trading down 1.5% at the time of going to print. Global oil prices jumped more than 5%.
Analysts said the Street is worried about foreign funds selling equities due to the geopolitical tensions. Foreign portfolio investors (FPIs) were net sellers after five days of buying in Indian equities. Foreigners sold shares to the tune of $84 million in the cash segment on Thursday, showed provisional data from stock exchanges.
A Barclays report showed that EM dedicated equity funds experienced $2.7 billion of outflows (or 0.3% of AUM) in the week leading to March 18, driven by GEM and EM Asian funds. EM dedicated bond funds experienced $0.45 billion of outflow (or 0.2% of AUM), with pressure concentrated among local currency bond funds.
Foreign investors’ interest in India was near a short-term peak, CLSA said in a note on Tuesday after interacting with 80 investors in the United States, adding several investors appeared to be “seriously re-evaluating” positions as they sit on hefty positions.
Overseas investors have pumped in $5.7 billion in Indian equities. They bought $16.1 billion last calendar, $19.75 billion in 2013 and 24.54 billion in 2012. Indian witnessed record in flows of $29.3 billion in 2010.
Back home, banks and technology companies led to the fall in equities. HDFC was the worst performer on the Sensex with 5.3% loss. SBI, Axis Bank and ICICI Bank declined at least 3% each dragging the Bank Nifty down 2.61%.
“Our sense is that the current bearishness should end with the series. But apart from the weakness of the derivatives, the cash market was also going through its own pain,” said Aseem Dhru, MD & CEO, HDFC Securities.
Wipro decreased the most in five months and Infosys fell 3.3% dragging the gauge of technology companies down the most in over three months.
“Global concerns had a cascading impact to the expiry day on which India was already consolidating… Markets opened with a huge downside gap and many investors stayed on the sidelines ahead of long holidays next week,” said Alex Mathews, head research, Geojit BNP Paribas Financial Services.
India VIX Index jumped 15%. Traders replaced 62% of current-month futures with April contracts, compared with a three-month average on the day of expiry, data compiled by Bloomberg show.