Mar­kets Reel Un­der Global Wor­ries, Shell Firm Or­der

An­a­lysts, how­ever, don’t see a sig­nif­i­cant cor­rec­tion as do­mes­tic liq­uid­ity is likely to re­main strong

The Economic Times - - Money -

The es­ca­lat­ing ten­sions be­tween the US and North Korea roiled do­mes­tic eq­uity mar­kets, which ended down for the third con­sec­u­tive ses­sion on Wed­nes­day at a three-week low. Sen­ti­ment was a l s o we i g h e d d o wn b y the Se­cu­ri­ties and Ex­change Board of In­dia’s di­rec­tive on Mon­day night to re­strict trad­ing in 331 sus­pected shell com­pa­nies. The un­cer­tainty saw the In­dia VIX — which mea­sures mar­ket per­cep­tion of the near term risks — spik­ing to its high­est level s i n c e Ma r c h d u r i n g Wed­nes­day’s ses­sion.

The Sen­sex and the Nifty lost 0.7% each to close at 31,797.84 and 9,908.05, re­spec­tively. The S&P BSE mid­cap and small­cap in­dices bled more, ending down 1.7% each. The In­dia VIX ended up 5.3% at 13.45 af­ter hit­ting a high of 13.68 in­tra­day — its high­est since March 14. For­eign port­fo­lio in­vestors sold shares worth ₹ 841.4 crore and do­mes­tic in- sti­tu­tional in­vestors picked up shares worth ₹ 553.2 crore, pro­vi­sional data on Wed­nes­day showed.

“The Sebi ban on 331 stocks and the es­ca­lat­ing spat be­tween the US and North Korea are push­ing in­vestors to sell. Be­sides that, in­vestors are sit­ting on prof­its and mar­kets look over­bought,” said Nis­chal Ma­hesh­wari, head of in­sti­tu­tional eq­ui­ties at Edel­weiss Se­cu­ri­ties.

In Asia, key re­gional mar­kets fell ETIG Data­base up to 1.3% while Euro­pean stocks were also firmly in the red. The Sen­sex is now 2.7% away from its life­time high of 32,686.48 and the Nifty is 2.3% away from all-time high of 10,137.85, hit ear­lier this month.

An­a­lysts don’t fore­see a sig­nif­i­cant cor­rec­tion as the do­mes­tic liq­uid­ity fac­tor is likely to re­main a strong sup­port­ing fac­tor. “Do­mes­tic flow of money into eq­ui­ties is too strong to al­low for a mean­ing­ful cor­rec­tion for a sus­tained pe­riod of time,” said Ritesh Jain, CIO at BNP Paribas As­set Man­age­ment In­dia. Money man­agers are of the view that if the cor­rec­tion con­tin­ues, com­pa­nies that have run up in the re­cent past de­fy­ing fun­da­men­tals are likely to get more im­pacted than fun­da­men­tally sound com­pa­nies.

They see the mid and small cap stocks fall­ing more steeply than the large caps. Among BSE Small­cap con­stituents, JBF In­dus­tries, HDIL, Shilpi Ca­ble Tech­nolo­gies and Kaveri Seeds have tanked 13-26% in the last three ses­sions. Within the mid-cap space, Ajanta Pharma, Sun TV Net­work and Go­drej In­dus­tries have lost 7-10% in the last three days. Su­nil Sharma, CIO at Sanc­tum Wealth Man­age­ment said stock val­u­a­tions in gen­eral have run ahead of fun­da­men­tals. “It is cer­tainly healthy to have th­ese pauses and the Septem­ber quar­ter num­bers to some ex­tent may de­ter­mine mar­ket’s direction.”

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