Indian stocks tumbled on Wednesday, in tune with the weak global sentiment in equities, sending the Sensex crashing to a new 20-month low of 24,062.04 points. The benchmark fell 417 points on Wednesday and has has now lost 19% from its peak in January 2015. How sharp the sell-off was is evident from the beating that stocks such as State Bank of India and Reliance Industries took, with both losing more than 5%.
The turmoil in the Chinese economy, the weak outlook on global growth and falling crude oil prices continue to dampen sentiment in stock and currency markets worldwide. In India, worries on further earnings downgrades are prompting fund managers and other investors to take risk off the table; skittish foreign portfolio investors (FPI) have sold $1.5 million worth of stocks in January so far. Investors have lost some R16.2 lakh crore of wealth over the past year and the Sensex has given up all the gains since the NDA government assumed office in May 2014.
While the earnings season thus far has seen more surprises than disappointments, with Infosys and Reliance beating estimates, several smaller companies have turned in poor numbers.
Lender Axis Bank on Wednesday reported a deterioration in asset quality suggesting non-performing assets of banks may continue to rise.
Investors have been particularly concerned about the loan books of state-owned lenders; their combined market capitalisation has virtually halved from R5 lakh crore last year to R2.8 lakh crore. The State Bank of India (SBI) stock fell 5.1% on Thursday, taking this year’s loss to 23 %, while Axis Bank lost 1.4%.
Fund managers the world over are concerned about China’s deteriorating economy. The International Monetary Fund on Tuesday cut its world growth outlook, highlighting weaker prospects for commodity-producing countries and the risks tied to the US Federal Reserve’s exit from ultra-low interest rates. In India, the sell-off has been broad -based with small and mid-sized stocks beaten down as investors exit the market. The 100-stock Nifty Midcap Index slid to a 13-month low on Wednesday, taking this year’s loss to 10%.