Bears got a tighter grip of Indian equities on Monday, with benchmark indices seeing sharp cuts similar to the ones in major Asian markets...
Bears got a tighter grip of Indian equities on Monday, with benchmark indices seeing sharp cuts similar to the ones in major Asian markets.
The Sensex declined to a three-week low as share sale by FPIs intensified amid concerns over first quarter corporate earnings, coupled with forceful tax levies (minimum alternate tax — MAT) by government on foreign funds and the contagion risks of Greece’s exit from the euro zone.
FPIs collectively sold nearly $250 million of equities in the cash segment on Monday, provisional data showed. Their domestic counterparts, were net buyers of R962 crore ($155 million), data showed.
Foreign funds have sold $400 million in the last four sessions, dragging benchmarks down nearly 3.5%. The Sensex lost 4.8% in March, the worst month in two years.
CLSA, Asia’s leading equity brokers and investment group, said the investment sentiment could be impacted further if India’s judicial bodies uphold the claims of the income tax authorities.
On Monday, the Sensex declined nearly 2%, or 555.89 points, to 27,886.21. The Nifty fell 1.83%, or 157.90 points, to end at 8448.10. Broader markets also witnessed similar cuts as traders pressed the ‘risk-off’ button. The BSE Mid- as well as Small-cap indices ended down more than 2% each, and all sectoral indices ended in the red.
Dealers and analysts said Monday’s decline was largely driven by sharp losses for Chinese stock-index futures on Friday and Monday, driven by China’s regulatory curbs on speculative trading, which, in turn, triggered drops in the US stock futures and European equities Friday.
On Monday, Chinese shares slumped the most in three months after the China Securities Regulatory Commission on Friday banned the margin trading businesses of brokerages from taking part in umbrella trusts, which allow investors to take on more leverage. “There was a combination of factors that were building-up for the last 4-5 days. The Street has concerns pertaining to earnings, uncertainty MAT and Greece’s exit from the euro zone. We expect the markets to remain volatile for the next six months given the sharp run-up in the past 10-12 months,” said Vaibhav Sanghavi, MD, Ambit Investment Advisory.
India Vix — a measure of market expectations of near-term volatility based on the Nifty 50 index options prices — jumped more than 8% on Monday. Market breadth was weak. Twenty eight of 30 Sensex constituents ended in the red. Overall, 1,994 stocks ended down against 845 stocks advancing. RIL tumbled 4.5% — the most since January 6 even as its quarterly profit beat analyst estimates. Tata Consultancy Services and Infosys slid for a fourth day, dragging down an index of software shares by the most in three weeks. Mahindra & Mahindra dropped for a second day.
Sanjeev Prasad, senior ED & co-head (strategy), Kotak Institutional Equities, said a potential 15-20% correction in high-growth quality stocks could take place if investors start questioning the Street’s earnings assumptions. Axis Bank retreated 2.9% to its lowest level since January 16. Reliance plunged 4.5%, the most on the Sensex. Hero Motocorp lost close to 4%.