Benchmark indices hit their lowest levels in over four months in the intra-day trade on Monday, as concerns over the outcome of the US presidential election and fresh stimulus measures by China kept global investors jittery.
The uncertainty over these global events added to the underlying concerns of high valuations and slowing earnings growth, and triggered a 2% fall in the Sensex and Nifty during the day to 78,232.60 points and 23,816.15 points, respectively.
However, the key indices managed to regain some lost ground. While the Sensex ended the day 1.2% lower at 78,782.24 points, the Nifty closed 1.3% lower at 23,995.35 points.
The foreign portfolio investors (FPIs) net sold shares worth Rs 4,329.79 crore, while the domestic institutional investors (DIIs) were buyers to the tune of Rs 2,936.08 crore.
UR Bhat, co-founder of Alphaniti Fintech, said, “There is a view that immediately after the US election, China will announce one more stimulus round for rejuvenating the market and economy. The last time that happened was probably the time when the FPIs started selling in India and investing in China. There could be one more episode of that.”
India VIX saw a 5% jump as investor wealth worth Rs 5.8 lakh crore got wiped out on Monday. All the sectoral indices ended in the red, with real estate, energy, metal and financial services companies hit the most.
The selling in the broader market was slightly more aggressive with the BSE Smallcap index falling 1.7% and the BSE Midcap index ending 1.3% lower. Overall, 2,717 stocks ended lower on the BSE, against 1,351 gainers.
Vinit Bolinjkar, head of research at Ventura Securities, said the headwinds with regard to the US elections as well as the US Federal Reserve policy meeting have led to further acceleration in the ongoing correction when Indian markets are trading at elevated valuations.
While the US presidential election will be held on November 5, the US Federal Reserve is scheduled to announce its policy decision on November 7.
While the record buying from DIIs has protected domestic equities from a significant decline, market participants believe further aggressive selling could wither sentiments.
“There is a certain amount of money that domestic investors and institutions can invest. But FPI sales have become quite aggressive… (If it continues), there is a view that it may not be possible for the domestic institutions and investors to sustain the market at these levels,” Bhat said.
