After a relief rally on Tuesday on hopes that the West Asia crisis may end soon, benchmark indices went deeper into the red again on Wednesday as energy prices continued to rise globally. In addition, disruption in the LPG supply in India caused dampened investor further.
The Sensex lost 1,342.27 points or 1.72% to close at an 11-month low of 76,863.71, while the Nifty fell 394.75 points or 1.63% to end the session at 23,866.85 – both worst performers in Asia.
Investors became poorer by Rs 5.14 lakh crore, as the total market capitalisation of BSE-listed companies declined to Rs 441.90 lakh crore. The India VIX index surged 11.41% to close at 21.06, indicating a rise in market volatility.
“Domestic equities ended lower as weak global cues and the ongoing US–Iran conflict kept risk-off sentiment elevated,” said Vinod Nair, Head of Research at Geojit Investments.
Concerns over rising inflation stemming from potential energy supply disruptions and rationing prompted investors to book profits, while continued FII outflows further added to market pressure, Nair added.
Across Asia, besides India, Indonesia (down 0.69%) and Hong Kong (down 0.24%) were the only other losers, while Taiwan (up 4.10%), Japan (up 1.43%) and South Korea (up 1.40%) were among the top gainers.
“The ongoing rise in crude oil prices and tightening natural gas supplies have sent shockwaves through the Indian equity market,” said Rupak De, Senior Technical Analyst at LKP Securities.
Technical Weakness
An already weak technical chart has extended its weakness, as the positive gap between the 50-day moving average (DMA) and the 200-DMA appears to be narrowing, heightening the risk of a death cross, he added.
A death cross occurs when the 50-DMA cuts the 200-DMA from above. If this happens, further rounds of selling pressure could emerge, potentially pushing the Nifty significantly lower.
Meanwhile, Brent crude prices were trading above $90 per barrel, while the Indian rupee closed above the 92 mark, depreciating 23 paise or 0.25% on Wednesday.
Overall market breadth remained negative, with 2,393 losers against 1,871 gainers on the BSE. The BSE MidCap and BSE SmallCap indices declined 0.98% and 0.34%, respectively, outperforming the benchmarks.
According to provisional BSE data, on Wednesday, foreign portfolio investors (FPIs) sold shares worth Rs 6,267.31 crore, while domestic institutional investors (DIIs) bought shares worth Rs 4,965.53 crore. During the seven trading sessions so far this month, FPIs have offloaded shares worth Rs 40,216 crore, while DIIs have bought shares worth Rs 53,100 crore.
Among sectoral indices, auto, private banks, financial services, PSU banks and realty were the top losers, declining by up to 3.15%, while pharma, oil & gas and healthcare were the top gainers, posting modest increases.
Inflation Fears
HDFC Bank, Axis Bank and ICICI Bank together accounted for 438 points, or 33%, of the Sensex’s 1,342-point decline.
Barring NTPC (up 0.72%) and Sun Pharma (up 0.66%), all other Sensex constituents ended lower on Wednesday. Bajaj Finance, Axis Bank, Bajaj Finserv, M&M and Maruti Suzuki were the top Sensex laggards, declining by up to 5%.