Sensex, Nifty at 7-month low

Deteriorating macro fundamentals, lacklustre earnings by key manufacturing companies led to slide

Selloff in global equities saw benchmark indices — Sensex and Nifty — close on Tuesday at levels last seen nearly seven months ago.

Most Asian and European markets posted steep losses as investors moved money out of risky assets. They opted for safe havens such as gold, Japanese yen and treasuries.

Rising geopolitical tensions, uncertainty over the death of a Saudi journalist and Italy’s budget row were seen as factors impacting global investor sentiment.

Hong Kong, Japanese and South Korean markets fell nearly three per cent, while most European markets traded more than a per cent lower. Meanwhile, Dow Jones futures index was trading over 400 points lower at the time when Indian markets were open.

Domestically, deteriorating macro fundamentals and lacklustre earnings from key manufacturing companies added to the dull mood.

Analysts said India Inc’s profitability is beginning to come under pressure due to surging input costs, currency weakness and rising interest.

The Sensex on Tuesday fell 287 points, or 0.84 per cent to 33,847.23, its lowest close since April 9. Meanwhile, the Nifty 50 lost 98 points, or 0.96 per cent, to end at 10,146, which is the lowest close since April 4. The Nifty is just 1.5 per cent above its one-year low of 9,998 touched on March 23. The one-year low for the Sensex is 32,507, recorded exactly a year ago.

Both the benchmark indices have come off more than 13 per cent from their lifetime highs touched on August 28. Depreciating rupee, rise in oil prices and spike in US bond yields are among the factors behind the market fall. Also, defaults by IL&FS and subsequent liquidity crunch at nonbanking financial companies (NBFCs) resulted in huge wealth erosion in financial stocks, which have significant share in the country’s total market capitalisation.

On Tuesday, foreign portfolio investors (FPIs) sold shares worth ~3.4 billion, while net buying by domestic investors was muted around ~1.2 billion. So far this month, overseas investors have pulled out $2.5 billion from domestic equities. FPIs have been net sellers in all the trading sessions of October barring one.

The NSE Midcap 100 index and Smallcap 100 index fell 0.9 per cent and 1.2 per cent, respectively. Both the indices are slightly above their multimonth lows touched earlier this month. The BSE 500 index also fell one per cent to its lowest level in more than a year.

Only two out of the 19 sectoral indices of the BSE ended with gains, with BSE Information Technology (IT) index declining the most at 2.8 per cent. IT majors Tata Consultancy Services (TCS) and Infosys fell three per cent each and were among the biggest negative contributors to the Sensex. Worst-performing Sensex stocks were Asian Paints and Sun Pharma, each dropping more than 5 per cent each.

In a note, ICICI Securities highlighted key risks to the market as “Tightening global liquidity, rising US bond yields, escalating trade and geopolitical tensions, elevated oil prices, depreciating rupee, impact of tight liquidity in the NBFC space on overall domestic demand and election-related uncertainty.”

Meanwhile, safe-haven buying saw prices of gold and US treasury go up.

Gold prices were headed for their highest close in three months and the benchmark 10-year treasury yields dropped to 3.15 per cent.