Broader market indices, which have underperformed benchmarks this year, took a heavy knock on Monday amid heightened volatility ahead of the US Federal Reserve’s rate decision, profit-booking and continued selling by foreign institutional investors.
The BSE Midcap index closed 1.7% lower at 45,810.54 points, its lowest level since October 3 and the BSE Smallcap fell 2.20% to close at 49,967.14, its lowest close since May 13. Large cap indices Nifty 50 and Sensex outperformed their broader peers and closed 0.7%-0.8% down. The Nifty Next 50 also closed 2% lower at 67,302.50 points.
India VIX- the volatility gauge- also surged 8% and closed at 11.12. The overall investor wealth fell by Rs 6.7 lakh crore –the most since September end this year.
What did Siddhartha Khemka say?
Siddhartha Khemka, head, research, Wealth Management, Motilal Oswal Financial Service said that the overall, the markets are expected to remain volatile ahead of the US Fed policy outcome, with commentary on the interest-rate trajectory shaping global investor sentiment. “On the domestic front, factors such as rupee-dollar movement, FII flow trends and the secondary-market liquidity environment amid elevated investor participation in primary markets are likely to influence the near-term market trajectory,” he said.
After being net buyers for two consecutive months, FPIs have become net sellers in the month of December and net sold equities worth Rs 8,347.41 crore while DIIs have net bought Rs 19,785.50 crore.
Aakash Shah, research analyst at Choice Equity Broking Private Limited, said the fall in the benchmark indices signalled a clear loss of upward momentum after multiple failed attempts to sustain higher levels. In addition, the fall in the broader markets reflected a noticeable contraction in risk appetite across the board.
IndiGo’s decline weighs down Nifty 50
An 8% decline in Indigo weighed the most on the Nifty 50 followed by 5% fall in Bharat Electronics and 2% in State Bank of India. All sectoral indices ended lower, with the most hit being BSE Services, BSE Realty, and BSE Capital Goods.
Ponmudi R, CEO of Enrich Money said, “Indian equities faced a sharp sell-off on Monday as persistent weakness in the rupee against the US dollar, along with uncertainty surrounding the conclusion of the India– US trade deal, weighed heavily on investor sentiment.”
He added that traders pared risk ahead of the upcoming US Federal Reserve meeting, prompting traders to pare risk. In the absence of fresh domestic catalysts, traders opted to lighten positions ahead of major global policy announcements and year-end portfolio adjustments.
The selling pressure was broad-based, with realty, defence, PSU banks, metals and FMCG stocks bearing the brunt of the decline.