Indian equities fell to a 3-month low on Friday, following on the losses seen on Wednesday, with the Nifty50 benchmark index ending 1.6 per cent lower on panic selling, induced partly by the allegations of irregularities by the Adani Group, that spilled over into banking, metals, and oil and gas stocks.
Under relentless selling pressure, the index fell 361 points to a low of 17,493.55 points before recouping some of the losses in the last hour of trade to eventually close at 17,604.35 points, well below its key support level of 17,800.
The Sensex ended 874.2 points, or 1.5 per cent lower, at 59,330.90 points. The indices have fallen over 1.7 percent this week, with most of the losses coming in the last two trading days.
India VIX, which measures the volatility in the market, rose 18 per cent to 17.3, indicating the uncertainty in the market. The volatility in the market is expected to persist next week as well, with stock-specific action.
Nishit Master, Portfolio Manager at Axis Securities, said that towards the second half of next week, markets could stabilise with bargain hunters emerging and picking up good-quality stocks available at reasonable valuations.
The losers in the index were led by Adani Group stocks. Adani Enterprises plunged 18.3 per cent, while Adani Ports saw a 15.2 per cent decline. Though a couple of brokerages came out with reports in support saying that the exposure of the Adani Group to the Indian banking sector was not significantly high, it failed to stem the mayhem. Eight listed companies in the group lost over ₹3 lakh crore in market capitalisation on Friday.
Despite the negative sentiments in the market, auto stocks saw gains led by index heavyweights Tata Motors and Bajaj Auto, both rising over 6 per cent. The other major gainers were Dr Reddy’s Laboratories, ITC, and Cipla.
Siddhartha Khemka, Head of Retail Research at Motilal Oswal Financial Services, said that foreign portfolio investors were heavy sellers in the market. Apart from the controversy surrounding the Adani Group stocks, there was also caution ahead of the Union Budget next week, as well as meetings by the US Federal Reserve, the European Central Bank, and the Bank of England.
Technical analysts said that any pullback rally from here will meet resistance at the 17,750-levels, and any rise would be seen as an opportunity to sell. The weakness is likely to persist in the early part of next week.
The weakness in the market was broad-based, and the Nifty Midcap 100 fell 1.5 percent while the Nifty Small-cap 100 ended nearly 2 percent lower. Among the sector indices, PSU banks and metal indices fell the most, while auto and pharma gained the most.
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