India's equity markets fall the most in six weeks

The country’s equity markets on Thursday witnessed the steepest fall in the last six weeks: the benchmark Sensex fell below the 21K mark on profit-booking across the sectors. For, investors turned cautious, given lack of clear signs about outcome of 2014 general elections.

The Sensex closed at 20888.33 loosing 252.15 points or 1.19%, the biggest daily fall since November 21 when it fell1.97% or 406.08 points. The CNX Nifty, too, closed down by 80.5 points or 1.28%.

Rumours related to political instability, disappointing PMI data (read the story alongside) and the fact that US Treasury yield surged to as much as 3.05% during the day also played a part in the fall.

The Sensex, which was trading in the green in the first half of the day, tanked nearly 443 points from intra-day highs falling sharply at 2 pm.

Sandeep Gupta, vice-president, Motilal Oswal Securities, says that the fall was surprising as there was no major news flow; but, it may have been due to fear as there were rumours regarding political uncertainty going on at that time.

The fall was surprising indeed because foreign institutional investors (FIIs) were net buyers of equities worth Rs 674 crore even as the domestic institutional investors or DIIs sold shares worth Rs 189.75 crore.

However, the fall could be due to long unwinding in the Nifty January futures index that witnessed a fall of 100.40 points with premium (to spot market) reducing from 56.50 points to 36.60 points.

Yogesh Nagaonkar, vice-president, institutional equities, Bonanza Portfolio, too, attributes the fall to heavy selling on back of political rumors, apart from pressure on the rupee due to US Treasury yield surging above 3%.

“The markets have seen a tremedous run-up in the last 3-4 months and some bit of correction is therefore warranted at current levels where a lot of stocks are trading at high valuations. The sudden selling in the afternoon was quite heavy with one-third of daily volumes likely to have come in at that time,” he said.

All the sectoral indices listed on BSE closed deep in red with only the IT sector managing to close with 0.11% gain. Realty and capital goods sectors lost 3.07% and 2.84% respectively while the banking index, too, tanked 1.82%.

Going ahead, experts believe markets may not see a major upside as political events unfold.

“We don’t see any reason for markets to rally sharply from here on. The strong emergence of the Aam Aadmi Party (AAP) has raised doubts about a strong BJP show and this, in turn, increases chances of a hung Parliament,” said Nagaonkar.