In worst fall in 6 months, Sensex slips 1,158 points

Mumbai | Updated on October 29, 2021

Sell-off by FPIs, downgrade by Morgan Stanley trigger crash


Nearly $4 billion worth of selling by foreign portfolio investors in October, triggered by a slew of ‘downgrade’ calls by leading foreign research houses, has hit stock market sentiments. On Thursday, the Sensex shed 1,158 points or 1.89 per cent to close at 59,984. This is the worst slump in the index in six months.

The Nifty index fell 353 points or 1.94 per cent to close at 17,854.

The Morgan ‘downgrade’

Just a day before the monthly expiry of stock derivative contracts, which usually is marked by high volatility in trading, Morgan Stanley (MS) said it was ‘downgrading’ India and taking profits off the table due to valuation concerns.

“While the fundamental leading indicators are positive, we see valuations as increasingly constraining returns over the next 3-6 months, particularly as we head towards Fed tapering, absorbing the impact of higher energy costs and our expectations of a first RBI hike for the cycle in February 2022,” Morgan Stanley said in a report.

Other foreign research houses such as UBS and Nomura too recently spoke about valuation concerns and downgrades.

Morgan Stanley’s call on Wednesday precipitated market volatility since there was little buying from domestic institutions to counter the FPI selling, experts told BusinessLine.

Majority of the stocks traded on the exchanges closed in the red. Some of the actively-tracked ones such as HIL, Adani Enterprises, Tata Chemical, Punjab National Bank and Vaibhav Global crashed over 10 per cent.

As per provisional data from stock exchanges, FPIs have sold cash market stocks worth ₹13,955 crore in October so far, ₹16,111 crore in stock futures and ₹4,572 crore in index futures segment.

“Thursday’s market fall seemed mainly due to expiry-related volatility. Since June, derivative call writers were taking a beating as markets closed higher month on month. But somehow,FPI selling this month saved the day for option writers. Valuation concerns in the market are sector- and stock-specific and there seems no major trigger for a massive crash. Markets could bounce back strongly in the coming months,” said Rohit Srivastava, strategist, Indiacharts.

Said Santosh Meena, Head of Research, Swastika Investmart Ltd: “We are in a structural bull market where intermediate corrections will be a part of the journey and will provide good buying opportunities in quality stocks.”


Published on October 28, 2021

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