Indian equity benchmarks on Friday continued their downward run for the fifth consecutive session amid fears that Israel was planning a significant retaliation following Iran's missile attacks. The 30-share BSE Sensex pack slumped 809 points or 0.98 per cent to close at 81,688 and the broader NSE Nifty index moved 236 points or 0.93 per cent down to end at 25,015. At today's closing levels, Sensex has cracked 4,147 points and Nifty has lost 1,201 points in five trading days.
Investor wealth, as suggested by the BSE market capitalisation (m-cap), fell Rs 4.18 lakh crore to Rs 460.89 lakh crore compared with a valuation of Rs 465.07 lakh crore recorded in the previous session. And, around Rs 16.26 lakh crore of BSE market cap has been wiped out from September 26's closing value of Rs 477.16 lakh crore.
Sharp foreign outflows in October so far and concerns over Brent crude oil prices, which topped the $78 a barrel level, hurt sentiment. Foreign institutional investors (FIIs) offloaded Rs 15,243.27 crore worth of shares on a net basis during the previous session while domestic institutional investors (DIIs) purchased Rs 12,913.96 crore worth of shares, exchange data showed.
Prashanth Tapse, Senior VP (Research) at Mehta Equities, said, "Negative bias continued for 5th straight session amid rising fears of a surge in crude oil prices due to the ongoing west Asia war. In case oil prices continue to spike a higher inflation scenario going ahead could further delay the prospects of a rate cut by the RBI." The Reserve Bank is scheduled to hold its bi-monthly meeting on October 7-9.
There are also worries that foreign investors are dumping Indian equities to invest in the battered Chinese mainland market, given its reasonable valuations and improved earnings outlook following stimulus measures announcement by Chinese authorities. Indian market valuations, in contrast, are deemed rich.
Vinod Nair, Head of Research at Geojit Financial Services, said, "The pessimism on the market is expected to continue in the near term amidst rising crude prices and fund flows to cheaper markets like China."
Market regulator Sebi's tightening of F&O (futures and options) rules further dampened the retail sentiment.
Raj Patel, CMO at MintCFD, said, "Investors should keep an eye on Crude oil prices, as a rise is negative for oil-importing countries like India. There is also a looming China factor, where the economic stimulus may result in sustained growth in Chinese stocks, prompting a potential outflow of funds from India."
Indian Investors and retail traders should watch the emerging situation very closely and be updated on global events, Patel added.
"Take a measured risk approach as the volatility may negatively impact the markets, but may also provide an opportunity to trade short-term volatility trends," he suggested.
Market veteran AK Prabhakar said market participants should consider buying quality stocks on dips.
For Sensex, the major culprits that dragged the index lower today were HDFC Bank, Reliance Industries Ltd (RIL), ICICI Bank, M&M, Bharti Airtel, ITC and Bajaj Finance. On NSE, 14 out of the 16 sub-indices were down. Nifty Auto, Nifty Financial Services, Nifty Oil & Gas, Nifty Consumer Durables and Nifty FMCG fell sharply. However, Nifty PSU Bank and Nifty IT closed in the green.