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Sensex sheds 2,200 points in 4 days: Investors lose Rs10.40 L Cr. Key factors spooking investors currently. FIIs sell:
The Sensex has lost 2,271.7 points or 3.7 percent in four days and the Nifty50 shed 691 points or 3.8 percent. During this period, investors have lost Rs 10.4 lakh crore of wealth as the mcap of BSE-listed companies came down to Rs 269.7 lakh crore from Rs 280 lakh crore.
Indian equity benchmarks tumbled in a volatile session on Friday, extending losses to the fourth day in a row. In these four back-to-back sessions of sell-off, the Sensex lost 2,271.7 points or 3.7 percent and the Nifty50 shed 691 points or 3.8 percent. During this period, a total of Rs 10.4 lakh crore of investor wealth was wiped out, as the market capitalisation of BSE-listed companies came down to Rs 269.7 lakh crore from Rs 280 lakh crore.
Before the continued selling, both headline indices were within one percent of their all-time highs, touched on October 19.
Concerns about earlier-than-expected tapering of the pandemic-era stimulus, the new COVID variants, expensive valuations, sustained selling by foreign investors and high crude oil prices are fuelling the latest bout of weakness in the market.
Here are some of the key factors behind the weakness on Dalal Street:
Higher interest rates: The markets have been staring at long impending policy normalisation across the globe. The question is: How soon will it happen? Hawkish comments by Federal Reserve officials and data showing accelerating inflation around the globe have once again sent investors assessing as to how soon before central banks hike rates and taper massive bond buys.
The US central bank has already announced an end to its massive bond-buying programme and paved the way for three 25-bps rate hikes by the end of 2022, citing uncomfortably high inflation. The Bank of England has already become the first major central bank to hike key rates.
Less liquidity in global markets could reduce allocations by foreign investors to markets, including India.
Foreign fund outflows: Foreign institutional investors have net sold Indian equities worth Rs 8,791 crore ($1.2 billion) so far in 2022. In the October-December period, they withdrew a net Rs 38,521 crore ($5.1 billion) from Indian shares, provisional exchange data shows.
Overheated valuations: Many experts have been warning of Indian equities’ valuations soaring to uncomfortable levels. Last year, several foreign brokerages and even the RBI have flagged expensive valuations. Until late October 2021, the Indian market had seen a near one-sided rally driven by liquidity.
COVID: The new variants of COVID-19 continue to worry investors globally about its repercussions on businesses the world over. Though there is a fall in new infections in many parts of the country, it is still now clear whether the recently imposed restrictions will continue going forward. Late last year, authorities in several states brought back restrictions in a bid to curb the spread of the Omicron variant of COVID.
Crude: Though crude oil has receded from its recent peaks, it is still up more than 10 percent for the year. Brent crude futures — a global benchmark — are currently hovering near the $87 a barrel mark. Morgan Stanley has raised its Brent price forecast to $100/bbl for the second half of 2022. India meets the lion’s share of its oil requirement through imports.
Inflation: Higher price increases across the globe fuel concerns about interest rate hikes and policy normalisation. Most central banks have said that high inflation is temporary, but many investors believe that price increases are unlikely to subside anytime soon. Many businesses are already struggling against higher raw material prices despite taking price hikes.
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