Inflation strikes market, investors lose Rs 5.3 lakh crore

MUMBAI:  Frontline indices Nifty and Sensex tanked over 2% on Thursday, wiping out Rs 5.3 lakh crore in investor wealth amid a global market rout and ahead of India’s April CPI release, which came in higher than Street expectations.  The rupee hit a record low of 77.63 to the dollar, in part due to FII selling. 

“Markets had priced in a higher inflation reading, but  with the figure being worse than anticipated, volatility is here to stay,” said Nilesh Shah, MD, Kotak Mahindra AMC.  The Nifty dived 359 points to close at 15,808, while the Sensex tumbled 1,158 points to 52,930.31. The Bank Nifty was at the threshold of a bear market having fallen from its record high by 19.8% to 33,532.15 Thursday. The Nifty Smallcap 100 is in bear territory falling below its March low at 8,714.35, signalling potentially more pressure for blue -chip indices like Nifty. 

A stock or index enters bear territory when it corrects 20% or more from its recent highs. The Sensex and Nifty are down 15% from their October 2021 record highs. With bears in control , analysts expect further downside. “Things could become worse before getting better,” said Rajesh Palviya, VP, Axis Securities.

“The next supports for Nifty are  at 15,672 and 15,500 , which if broken could result in further pain.” The uncertainty in the market was reflected by fear gauge India Vix rising 6.41% to 24.27, with a reading above 20, signalling negative sentiment. 

FIIs continued their selling streak offloading a provisional Rs 5,256 crore worth of shares Thursday. So far this fiscal year, they’ve sold shares worth a whopping Rs 37,550 crore. Last fiscal they sold shares worth Rs 1.4 lakh crore of equities. 

Rohit Srivastava, founder, IndiaCharts, said Indian stocks were in a “bear market” and higher inflation in April meant more aggressive rate tightening, which would queer the pitch for the market.  “We see June’s policy to be super-live, and the MPC may front-load rates by another 25bps-40bps,” said Madhavi Arora , lead economist, Emkay Global Financial Services.