Indices crack on FPI selling, election outcome uncertainty
Benchmark indices dipped sharply on Thursday on selling by overseas investors and nervousness around the outcome of the Lok Sabha elections.
The Sensex slid 1,062 points to 72,404, while the Nifty 50 settled at 21,958, down 1.55 per cent, the fifth straight day of decline. Broader indices Nifty Midcap 100 and Nifty Smallcap 100 declined 1.85 per cent, and 1.83 per cent, respectively.
Cash market volumes on the NSE stood at ₹1.02-lakh crore even as the advancedecline ratio fell sharply to 0.17:1, the lowest since March 13. The volatility index, India VIX, spiked about 7 per cent to above 18 levels.
FPI SELLING
“Sustained FPI selling and the fear of a not-so-favourable election outcome have dented market sentiments. With voter turnout (65.68 per cent) slightly lower than 2019 for the same seats (except Assam), investors have turned nervous about BJP’s expected seat count. We expect this volatility to continue in the near term in the absence of any major positive trigger,” said Siddhartha Khemka, Head of Retail Research, Motilal Oswal Financial Services.
Foreign portfolio investors continued to sell, offloading shares worth nearly ₹7,000 crore, while domestic investors bought for ₹5,642 crore, provisional data showed.
CHINA, HK SHINE
Apart from the high US bond yields and the uncertainty around the election outcome, the outperformance of the Chinese and Hong Kong markets also contributed to FPI selling. During the last one month the Nifty has shed 3.5 per cent, while the Shanghai Composite and Hang Seng are up 4.2 per cent and 8.2 per cent, respectively.
“Chinese and Hong Kong markets are cheap with PEs around 10 while India is expensive with double the PE of these markets. So long as their outperformance continues, FPIs are likely to sell,” said VK Vijayakumar, Chief Investment Strategist, Geojit Financial Services.
Also, caution ahead of Bank of England’s policy announcement and hawkish statements from a few US Fed o©cials kept markets on the edge. Last week, the Fed kept the rates steady and hinted that they could remain higher for some more time.