The benchmark Sensex posted its biggest single-day drop in nearly seven months after a sharp sell-off across the sectors led by auto and IT pulled down the index to 35,975.63 – its lowest level since July 10. While the Sensex fell 550.51 points or 1.5% on Wednesday, the broader Nifty ended the session at 10,858.25 down 150.05 points or 1.4% from the previous close. The Sensex fell by more than 500 points on at least one session in each of the preceding three weeks, and the Index managed to end in the green only six sessions since the beginning of September.
Software exporters like Tata Consultancy Services (TCS), Infosys and Wipro together contributed over 30% of Sensex fall on Wednesday, with TCS alone contributing 100.71 points to the index’s fall. Barring Nifty Metal, all the sectoral indices on NSE ended in the red on Wednesday, with Nifty Auto declining as much as 2.9%. This followed by Nifty IT, which slid 1.9%. In fact, the gauge for IT stocks has never seen similar losses ever since the rupee breached 70-mark against US dollar.
The rupee lost another 43 paise on Wednesday to hit a record low of 73.34 against the dollar amid rising global crude oil prices and strong demand for the American currency from the importers. The Indian currency has given up close to 13% so far in 2018. At 10,858.25, the benchmark Nifty50 has given a negative return of 10.2% in dollar terms since January, while the S&P 500 has risen by 9.3% over the same period.
While the index has gained 3.1% in rupee terms, this is thanks to the outperformance of just a handful of stocks. The broader market has under-performed, with the Nifty Midcap losing 19.2% and the Nifty Smallcap giving up close to 32% between January and now. What’s more, over 77% of all stocks with a market capitalisation of Rs 1,000 crore and above are trading in the red since the beginning of 2018. Moreover, nearly a half of these 743 stocks have lost more than a quarter of their value so far in 2018.
The poor breadth of the market has probably kept FPIs away; so far in 2018, the overseas investors have pulled out Indian equities worth $2 billion. Barring July, FPIs remained net sellers in every month since April. However, domestic institutions have been buyers to the tune of $12.2 billion.