Mumbai: Indian equities slumped on Friday as moves by global central banks to end the era of ultra-cheap cash, unleashed at the beginning of the Covid-19 pandemic, heightened risk-off sentiment. The spread of the Omicron variant in Europe added to the caution in global financial markets.
The Bank of England on Thursday became the world’s first major central bank to hike interest rates since the pandemic began – to 0.25% from 0.1%. A day earlier, the US Federal Reserve signalled that it is accelerating the reduction of its liquidity programme and then raise interest rates thrice in 2022 to contain inflation.
Motilal Oswal Financial Services chairman Raamdeo Agrawal expects the market to drop further. “It is going to be unsettling till the tapering is over,” said Agrawal. “We had a wonderful last one year and the market will correct from here.”
On Friday, the Sensex ended 889.40 points or 1.5% down at 57,011.74 and the Nifty fell 263.20 points or 1.5% to 16,985.20.
‘Nifty can Go Further Down’
The benchmarks logged their second worst week in almost 10 months, dropping 3%.
The Nifty and Sensex logged their worst single-day fall since December 6 on Friday, with the 50-stock Nifty also closing below 17,000 for the first time since December 6.
“The setup is showing that the Nifty can go further down,” said Rajesh Palviya, head, technicals and derivatives, Axis Securities. “In the last fall, Nifty made a low of 16,780 and it is a good support. There is a probability of a pullback if it sustains above that level. The pullback will not be large and is likely to be restricted at 17,250, which coincides with 100-day moving average as well as 20-day moving average.”
The Nifty and Sensex are down 8% from all-time highs in October but up over 21% in the past year.
Market participants are also watching the dramatic rise in Omicron cases with discomfort.
European Commission president Ursula von der Leyen said Wednesday that Omicron is expected to be the dominant coronavirus variant in the 27-nation bloc by mid-January.
Though investors are not willing to act on the basis of the increase in infections yet, shares of travel, tourism and entertainment sectors could be ignored for the moment.
Financials took the biggest knock in Friday’s session with IndusInd Bank being the worst hit on the Nifty with a near-5% decline. Kotak Mahindra Bank, Hindustan Unilever, Titan Company, HDFC and Bajaj Finserv fell 3% and more, becoming the next biggest laggards in the Sensex after IndusInd.
IT Stocks Gain
As investors rushed to the safety of defensives in a weakening market, the benefit went mostly to information technology companies, whose shares rose after Accenture posted strong first quarter results. Infosys gained nearly 3%, HCL Technologies rose 1% and Tata Consultancy Services logged a gain of 0.2%. Wipro gained 4%, helping the Nifty IT index advance by 1.3% on Friday.
“Small and midcaps will correct deeper but even large caps will be under pressure as FIIs (foreign institutional investors) are selling. I don’t think it is a conducive environment for the market to rise significantly,” said Agrawal. He also said there is “too much euphoria” in the IPO market.
NSE’s midcap index dropped 2.4% and the smallcap index declined 2.5% on Friday.
Foreign investors Friday net sold shares worth Rs 2,069.90 crore, while their domestic peers bought to the tune of Rs 1,479 crore.
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