The Indian benchmark indices – the Sensex and the Nifty – have offered decent returns to investors so far this year, rising 13-15%. However, this rally has not been linear.
This week alone, on Thursday, October 4, the benchmark indices experienced their worst single-day drop in over two months. This decline can be attributed to heavy selling by foreign portfolio investors (FPIs), who pulled out ₹15,243 crore on that day, marking the largest daily outflow by FPIs in the last four years. In addition, growing concerns around tensions in the Middle East weighed heavily on investor sentiment.
Both the Sensex and the Nifty extended this decline into Friday’s trade, shedding nearly 1% each. The Nifty breached the 25,000 level in intra-day trade and finally settled near the day’s low, with a loss of over 200 points, or 0.90%, at 25,015.
“We expect markets to consolidate next week amid cautiousness due to fears of escalating tensions in West Asia. With the earnings season starting next week, stock-specific action will continue. The focus will also remain on interest-sensitive stocks ahead of the RBI policy meeting. While a rate cut is not on the table, the commentary will hold significant importance,” said Siddhartha Khemka, Head of Research, Wealth Management at Motilal Oswal Financial Services.
The largest single-day drop of this year occurred on June 4, the day the general election results were announced, with the Sensex falling by 5.74%. On that day, FPIs sold shares worth ₹12,436 crore, highlighting the significant influence they have on Indian equity markets. Domestic Institutional Investors (DIIs) also contributed to the sell-off, recording net sales of ₹3,319 crore.
Meanwhile, the second-biggest fall of the year came on August 5, when the Sensex tumbled by 2.74%. The index took a hit amid a bearish mood in global markets, fueled by recessionary fears in the U.S. following disappointing job statistics and an unwinding of carry trades after the rapid rise of the yen. On this day, FPIs sold stocks worth over ₹10,000 crore.
Disclaimer: The views and recommendations given in this article are those of individual analysts. These do not represent the views of Mint. We advise investors to check with certified experts before taking any investment decisions.
