By Yoosef KP
Benchmark indices slipped to their seven-month lows on Friday, after Russian forces took over Europe’s largest nuclear power plant in Ukraine amidst intense fighting. While the Sensex erased earlier loss of 1,215 points to settle at 54,333.81, down 768.87 points or 1.4%, the broader Nifty50 closed 252.70 points or 1.53% lower at 16,245.35 on Friday.
The extensive selloff has also brought the valuation multiple of Nifty50 to 18.52 times of its 12-month forward earnings, which is 18.8% discount to the record valuation seen in October 2021. Yet, the PE multiple is higher than its 10-year average of 16.7x, Bloomberg data shows. The Nifty50 has corrected 12.1% from its October highs, of which 43% of the fall was contributed by HDFC twins, Reliance Industries and Hindustan Unilever.
The Nifty50 is currently trading at 4.1% lower to its 200-day moving average of 16936.96. The index has been closing below the crucial support level since February 23.
Indian equities have fared the worst after Russia in dollar terms, ever since the Ukraine crisis broke. While the Nifty50 has declined 6.7% in dollar terms since February 23, Taiwan TAIEX fell 2.7% and Korea’s Kospi slid 2.3%. Russian stock market remained closed after last week’s 31.9% plunge.
The selloff seems to have been happening at the larger counters than the mid-sized companies. Over the last six months, midcaps have outperformed their larger peers with 5.3% fall compared to a larger drop of 6.4% in Nifty50.
“The Russia-Ukraine conflict has resulted in a global risk-off, with equity markets undergoing intermittent bouts of correction and elevated volatility. The uncertainty over the duration and magnitude of the extant conflict could keep the market jittery and dependent on news flow,” Motilal Oswal Financial Services wrote in an investor note.
Meanwhile, the Brent continued to trade above $100 per barrel levels for the fifth day on Friday, with nearly hitting an intra-day of high of $120 mark in previous day’s trade. Oil prices have rallied 15.5% during the week. “Supply constrained oil price rises are bad for India. Indeed, the recent 25% jump in oil prices will expand the current account deficit by 75 basis points (bps) and inflation by 100 bps on an annualised basis,” Morgan Stanley wrote in a strategy note on Friday.
Foreign portfolio investors continue to offload Indian shares, having sold equities worth $5.4 billion in the last thirteen session through Thursday. The selloff was strongly absorbed by domestic institutional investors with a purchase of $5.9 billion during the period. “FIIs continue to remain net sellers in India as the global risk-off sentiment and the geopolitical situation have added to concerns of inflation, higher bond yields, and global rate hikes,” said Siddhartha Khemka, Head – Retail Research ad Motilal Oswal Financial Services.
All sectoral indices compiled by the BSE ended the day in red with auto, metals, consumer durables, realty and telecom leading the losses.
