Historically high valuations, concerns over refund of over ₹65,000 crore claims under the GST regime, and heightened tensions over North Korea took their toll on India’s equity markets on Friday.

The BSE Sensex crashed 447 points (1.38 per cent) to close at 31,922. The broader index CNX Nifty of the National Stock Exchange fell 1.56 per cent to close at 9,964.

The markets were rattled by analysts’ claims that the government’s GST calculations may go awry.

Over 46 lakh businesses had paid around ₹95,000 crore in taxes in July, but claimed ₹65,000 crore as refund. The government, it was feared, would have to scramble to make refunds. But the Finance Ministry clarified that transition credit claims were not “incredibly high” since ₹1.27 lakh crore of credit of Central Excise and Service Tax was lying as balance as on June 30.

Global investor sentiment was down after North Korea said it may test a hydrogen bomb in the Pacific Ocean.

“Despite the mayhem, we remain constructive on stock markets,” said Steven Birch, President, William O'Neil+ Company, a global equity research house. “Indices are in a confirmed up-trend... It is still not a situation to run for cover.”

Birch said markets were discounting the Korea tensions as none of the US media was seriously talking about the possibility of an armed conflict. “Every time stocks decline due to (Korea tensions), there is a buying opportunity,” he said.

But other analysts believe the market’s internals have started to weaken. “The broad market is giving up ahead of key indices,” said Rohit Srivastava, fund manager, Sharehkan-BNP Paribas. “A downward momentum may gain traction as we enter October.”

This week marked only the third time that the Nifty index saw its price-to-earnings multiple rise above 26. On two earlier occasions, in 2000 and 2008, the markets crashed sharply.

The rupee dropped to a six-month low against the dollar on Friday due to concerns of India’s widening fiscal deficit and the US Fed’s announcement of a rollback of the stimulus.

Finance Minister Arun Jaitley had on Thursday promised “appropriate action” at the “right time” to revive the economy as growth slipped to a three-year low of 5.7 per cent in the June quarter.

Tata Steel was the top Sensex loser, down 4.70 per cent, followed by L&T, down 3.49 per cent. Reliance Industries, Hero MotoCorp, SBI and Adani Ports were among the others that fell. Investor wealth eroded by ₹2.68 lakh crore on Friday. FPIs sold stocks worth ₹1,241 crore while DIIs bought in for ₹521 crore in the cash market.

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