Bears rip ₹8.75 trillion of investor wealth | Stock Market News

Foreign portfolio investors (FPI) dumped local stocks for a fourth straight day on Friday, causing the bellwether Nifty 50 and Sensex indices to log their biggest weekly fall in 30 months. This and heavy direct selling by retail clients caused investor wealth to plunge by ₹8.75 trillion overnight.

The Nifty and Sensex fell by 1.5% each to 23,587.5 and 78,041.59 points on Friday as FPIs net sold shares worth a provisional ₹3,597.82 crore, which offset the net purchase of ₹1,374.37 crore by domestic institutional investors.

The rupee also tested a new low on Friday before recovering to close higher following the Reserve Bank of India’s intervention.

With Friday’s fall, both the Nifty and Sensex have tumbled below their crucial 200-day simple moving averages (SMA), which underscores the bearish trend amid rising dollar and US bond yields. The 200-day SMA measures the average levels that the Nifty and Sensex have traded at for the past 200 days. The 200 SMA for Nifty lies at 23,834 and for the Sensex at 78,320.76.

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Analysts expect the weakness to persist as smallcap and midcap stocks (smids) could plunge more than large caps, which had lost more until Friday from the market’s September high.

The Nifty Midcap 150, which closed down 2.41% at 21,050.6 points on Friday, was 6.5% below its record high of 22,515.4 reached on 25 September. The Nifty Smallcap 250, which closed 2.01% lower at 17,693.65 on Friday, was just 5.3% below its life high of 18,688.30 on 24 September. 

In contrast, the Nifty as of Friday had corrected 10.2% below its record high of 26,277.35 reached on 27 September.

“The bearishness is imported,” said Shrikant Chouhan, head-equity research, Kotak Securities. “Passive selling through foreign ETFs (exchange-traded funds) is happening, leading to an across-the-board fall. We will have to wait for more clarity to emerge by next month when (US president-elect) Trump takes over and around (India’s) Budget on 1 February, by which time Q3 earnings will also be out.”

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pain likely before market stabilises

Institutional selling dragged the rupee to a fresh low of 85.10 against the US dollar on Friday. The rupee, however, recovered to close up 5 paise at 85.02, likely as RBI sold dollars through public sector banks, per Chouhan, who expects the local currency to trade between 84.90 and 85.5 over the next month.

Even buying by rebalancing of Sensex and FTSE indices was absorbed by the markets due to the FPI selling. Zomato Ltd, which was to see estimated inflows of $513 million owing to the semi-annual rebalancing of the Sensex, plumbed 2.29% to end Friday at ₹281.85 per share on BSE. Zomato will replace JSW Steel Ltd effective Monday on the 30-stock Sensex.

The International Gemmological Institute (India), which debuted on the Street at a premium of 22% ( ₹510 per share) to its issue price, closed 7.6% below the listing price, underscoring the selling pressure.

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“As large caps have fallen more than smids there could be more pain in the market before things begin to stabilise,” said Swarup Mohanty, vice-chairman and chief executive, Mirae Asset Investment Managers (India).

Mohanty added that the markets look “reasonably” valued and this time could be used to accumulate quality stocks. He has a preference for big private banks and select consumer stocks with a significant rural presence as he believes the recovery in rural demand will offset the urban slowdown.

Reliance Industries Ltd, which hit a 52-week low of ₹1,201.5 per share on Friday because of the selling, HDFC Bank Ltd, Axis Bank, Tata Consultancy Services Ltd, and Larsen & Toubro Ltd contributed two-fifths of the Nifty’s fall of 364.20 points on Friday.

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