Markets crash for fourth day, investors lose over Rs 13 trillion in wealth

Markets crash for fourth day, investors lose over Rs 13 trillion in wealth

Benchmark indices fell for the fourth straight day on Monday amid weak global cues and selling by overseas investors.

The Sensex slid 954 points, or 1.6%, to close at 57,145, while the Nifty 50 index ended at 17,016, down 1.8%. Investors have lost over Rs 13 trillion in wealth over the last four days.

Foreign portfolio investors sold shares worth Rs 5,100 crore on Monday, provisional figures show, after offloading shares worth Rs 2,900 crore on Friday. In the year to date, the investors have net sold $20.6 billion.

Outflows from US-listed emerging market ETFs that invest across developing nations as well as those that target specific countries totaled $1.73 billion in the week ended September 23, compared with gains of $3.5 million in the previous week, according to data compiled by Bloomberg.

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The rupee slid to a new record low against the dollar, closing at 81.58 against the greenback. The dollar index, which gauges the greenback’s strength against a basket of six currencies, advanced to 114, before easing to 113 levels and is up about 3.5% in the past five days.

The benchmark 10-year US treasury yields jumped to 12-year highs on Friday on concerns that central banks globally would keep tightening monetary policy to tackle inflation, with yields ruling above 3.7% on Monday.

“We have got to get inflation behind us. I wish there were a painless way to do that. There isn’t,” Fed chair Jerome Powell said in a press conference last Wednesday.

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S&P Global Ratings and OECD on Monday retained India’s growth forecast for the current fiscal at 7.3% and 6.9%, respectively. S&P Global sees India growing at 6.5% for the next fiscal, although it sees the risks tilted to the downside.

“The speed with which central banks across the globe are hiking interest rates, investors are worried that slackening growth would push key economies into recession. With the monetary policy decisions on the anvil, rate-sensitive stocks like banking, realty & auto crumbled badly as rate hikes could dent demand going ahead,” said Shrikant Chouhan, head of Equity Research (Retail), Kotak Securities.

Global risk assets, including equities, extended their selloff on Monday as fears of faster inflation and global recession continued to rise. Asian indices ended in the red, with Japan’s Nikkei 225 sliding the most at 2.7%.

The Chinese government raised the foreign exchange risk reserve requirements for financial institutions to stem a drop in the yuan, making it more expensive for traders to short the currency.

“The recession fears in the US and European countries, the Russia-Ukraine war and the political uncertainty in China has cast a cloud of uncertainty in the global economy. A slowdown/recession would impact our country’s exports as demand for goods and services would begin to dry up,” said Sandeep Bhardwaj, CEO, IIFL Securities.

Bhardwaj expects higher volatility in IT stocks in the medium term. Banks, on the other hand, are well placed with supportive monetary stance, healthy capitalisation, improved liability profile, diversified asset mix and healthy asset quality along with strong coverage ratios, according to him.

“It is a sell on rise market for the medium term, but this would provide an opportunity to accumulate quality stocks for the long term. We would emphasise large caps over mid-caps as earnings growth estimates in mid-caps, and especially small caps, are much in excess to historical levels,” Bhardwaj said.

All eyes will now be on the six-member Monetary Policy Committee, which is scheduled to meet from September 28-30. The dollar’s continued strength, as well as geopolitical concerns in Europe will weigh on the MPC, which is likely to go ahead with a 50-bps hike, said experts.