Overnight fall in US-based tech stocks spilled over into India on Friday, with Sensex and Nifty dipping 1.5 per cent each as foreign portfolio investors (FPIs) sold relentlessly.
As 2021 winds down, analysts are pinning hope on the Union Budget and the Uttar Pradesh Assembly elections in February/March for the market sentiment to improve. But there seems to be a consensus that the Nifty index is near its short-term bottom after Friday’s fall.
Sensex sheds 890 points
The Sensex fell 889 points to close at 57,011 wile the Nifty was down 263 points at 16,985.
Besides the overnight fall in US-based tech stocks, the benchmark indices were weighed down by central banks of advanced economies turning hawkish and Omicron cases rising globally.
Tech heavy Nasdaq index in the US, which dropped 2.6 per cent on Thursday, opened weak on Friday. This saw markets in China, Hong Kong and Japan decline on Friday.
US markets were falling due to “quadruple witching”, an event whereby all derivative contracts of different segments expire on the same day, causing huge volatility.
FPIs on selling-spree
India’s stock exchange data showed that FPIs sold stocks worth ₹ 2,069 crore in the cash segment and ₹470-crore worth index futures on Friday. Same data showed that FPIs offloaded stocks worth ₹ 26,687 crore in the cash segment, ₹4,275 crore in index futures and ₹3,873 crore in stocks futures in December. During the same period, domestic institutions bought stocks worth ₹20,042 crore.
Yield on the benchmark 10-year Government Security, carrying 6.10 per cent coupon, hardened about 4 basis points to close at 6.4102 per cent, with its price falling about 25 paise to close at ₹97.8025.
This paper was sold at a higher yield (about 3 basis points higher vis-a-vis previous close) at 6.4034 per cent at the auction . The price at this yield was about 20 paise lower at ₹97.85.
“We are six-eight weeks away from two big domestic events, the Budget and UP elections that could potentially set the market direction. After Friday’s fall, the Nifty index seems near its short-term bottom and on the upside the levels for the index could be capped at around 18,600,” said Rahul Arora, CEO, Institutional Equities, Nirmal Bang. He observed that corporate earnings for the past year (FY22), which had been robust due to the negative base effect, will moderate in FY2023.
“Markets will see a fresh breath of air once investors start factoring in FY2024 earnings and that’s when Nifty could break the upward range. We are six-eight months away from this,” said Arora.
IPOs upset secondary market
Analysts say IPOs have upset the secondary market rally as liquidity was being sucked out to invest in the primary market.
“Between ₹60,000 crore and ₹80,000 crore has been sucked out from secondary markets to invest in IPOs in the last couple of months. Upcoming IPOs of LIC and the NSE will suck out more liquidity. It is simply not allowing Nifty to break 18,600. Further market crashes will be restricted as domestic funds are countering FPI selling,” said Kishor Ostwal, MD, CNI Global Research.