The Indian stock market and the rupee continued to bear the brunt of the crisis in West Asia on Monday as Brent crude prices breached the $100 per barrel mark, first-time in 42 months (since Sep 2022), amid rising geopolitical tensions. Both the Sensex and Nifty lost over 3% at the start of the session, though they recovered significantly to close over 1.7% lower.
The rupee also hit a fresh record low of 92.33 against the dollar, falling 59 paise or 0.64%, making it the third-worst performing currency in Asia on Monday, after the Philippine peso and the Taiwanese dollar.
The Sensex plunged 2,494.35 points or 3.16% at the start of the day. However, it recovered 1,142 points or 1.49% from the day’s low to close at 77,566.16 — down 1,352 points (1.71%), marking its worst fall since February 1. HDFC Bank, ICICI Bank and SBI together accounted for 605 points, or 45%, of the Sensex’s 1,352-point decline.
Similarly, the Nifty slumped 752 points intraday but recovered 330 points or 1.4%, ending the session at 24,028.05 — down 422 points (1.73%).
Market breadth remained sharply negative
Market breadth remained sharply negative, with 3,379 losers against 972 gainers on the BSE. The broader BSE MidCap and BSE SmallCap indices declined 2.12% and 2.35%, respectively.
Despite the sharp decline, domestic indices performed relatively better compared with their Asian peers on Monday. South Korea led the losses with a 5.96% fall, followed by Japan (down 5.20%), the Philippines (down 4.97%), Taiwan (down 4.43%) and Indonesia (down 3.27%).
Investor wealth eroded by Rs 8.6 lakh crore, bringing the total market capitalisation of BSE-listed companies down to Rs 441.10 lakh crore. Since the start of the US–Israel–Iran conflict, a total Rs 22.4 lakh crore of wealth has been wiped out.
Market volatility
Market volatility, as measured by the India VIX index, surged 17.51% to close at a 21-month high of 23.36.
Continuing their selling spree, foreign portfolio investors (FPIs) sold shares worth Rs 6,345.57 crore, while domestic institutional investors (DIIs) bought shares worth Rs 9,013.80 crore, according to provisional BSE data.
Both the Sensex and Nifty are now 9.56% and 8.74% lower, respectively, from their January peak levels. Despite the correction, valuations remain elevated. So far in the current calendar year, Sensex and Nifty valuations have declined by 254 basis points (from 21.11 to 18.57) and 234 basis points (from 20.87 to 18.53), respectively.
Yet they remain the second most expensive markets in Asia after Japan. Said D P Singh, deputy managing director and joint CEO, SBI Mutual Fund believes that while valuations are fairer now, volatility can still continue for some time.
Nilesh Shah, MD, Kotak Mutual Fund added that the main concern is oil. “The market is constantly evaluating the middle east crisis to estimate adverse impact of oil across rupee rate and equity market which has created a perfect storm.”
The availability and price of crude oil are critical, as it could have an adverse impact on the inflation, current account deficit and GDP growth.
A Balasubramanian, MD & CEO, Aditya Birla Sun Life AMC, added that while uncertainty arising out of current geo political risk has created immense volatility in our market, the Indian economy is on a strong footing with various policy framework and investment leading to creating long term sustainable growth in our economy.
Both Shah and Balasubramanian believe that investors should continue with their systematic investment plans (SIPs) without worrying too much about the market conditions and follow their asset allocation. Shah cautioned that investors should not risk more than they can manage.
Deepak Shenoy, CEO, Capitalmind Mutual Fund, however, wrote on X (former Twitter) that it is too early to say it is over since we are just 10% below all-time highs on the Nifty 500. But a 10% is usually a good point to start looking at measured allocations, going forward.
“I honestly believe that market drops provide opportunities, but there’s no way to say what the bottom is, so any lumpsum investing should be spread over a period of time – could be three months to a year,” he wrote on X.
Even SBI’s Singh believes that investments can be made in a staggered manner through a multi-asset allocation fund, fixed income instruments, equity savings fund and other. “My view is that some money can be invested at this point of time,” he added.
Among sectoral indices, auto, PSU banks, consumer durables, private banks and metals were the top laggards, declining by up to 4.1%.
UltraTech Cement, Maruti Suzuki, M&M, SBI and InterGlobe Aviation were the top Sensex losers, falling by up to 5.23%. On the other hand, Reliance Industries, Sun Pharma, Infosys, Tech Mahindra and HCL Tech were among the top gainers, rising by up to 1.37%.