The rout in the domestic market deepened on Thursday with the benchmark indices falling over 3 per cent in a single session.
Continuing concerns of a global slowdown, crude oil closing at 12-year lows and, locally, banks reporting rising bad loans, higher provisioning and a drastic fall in their quarterly profits sent the market into a downward spiral.
The Sensex lost 807 points on Thursday, closing at 22,951.83, while the Nifty finished at 6,996, down 239 points and breaking the crucial psychological 7,000-mark. The Bank Nifty lost a massive 3.84 per cent, closing at 14,028.55. Sectoral indices for financial services, auto, commodities and energy all closed down 3 per cent.
“If you’re in the market right now trying to make a quick buck, proceed with caution,” said Anil Sarin, CIO, Equity, Global Asset Management, Edelweiss Financial Services. “If you’re in for the longer term, it’s time to start deploying your funds.”
Globally, record crude inventories in the US sent Brent crude futures sliding to $30.53 a barrel, while WTI crude touched $26.76, close to its lowest levels since 2003. The US Federal Reserve is caught in a limbo as well, unable to raise interest rates as it had initially planned, but also unwilling to back out of the tighter monetary policy path it had set for itself.
Fallout of bank clean-up Back home, bank stocks reeled after implementing the RBI’s forced clean-up of their balance-sheets. State Bank of India reported a 62 per cent fall in profit with gross NPAs rising 28 per cent. The stock lost close to 3 per cent to end the day at ₹154.20. Indian Bank lost 5.70 per cent to close at ₹80.30. The broader markets took bigger hits, with the BSE MidCap index losing 3.27 per cent to close at 9,690.90 and the SmallCap index closing down 4.64 per cent at 9,801.26.
Foreign investors sold close to twice as much Indian equity as they bought on Thursday, offloading net equity worth ₹1,112.66 crore. Domestic institutional investors bought net equity of ₹1,222 crore while domestic retail investors bought net equity of ₹81.53 crore on the BSE.
“Globally,” Sarin added, “we’re seeing risk-off behaviour set in, with investors shunning riskier assets, like emerging market equity. Sweden has gone further into negative interest rate territory; there are worries about bad loans in China and how the currency will react to that, while credit default swaps for Deutsche Bank are shooting through the roof. Everybody’s looking for safer assets, and because in India we are over-owned by FIIs, we’re getting hit worse.”
In an attempt to soothe investor nerves, Economic Affairs Secretary Shaktikanta Das said the decline in the domestic stock market and the rupee depreciation are a result of international events and India continues to be better off than other countries.
India still better off “World over, markets are going down as corporates are facing stress and are re-adjusting their business models. India is not an exception … we are certainly better off,” he said.
Though “uncertainty and volatility appear to be the new norm,” he said, “India is set to grow at a robust rate.”