Stocks extend losses as Sensex sees biggest losing streak since September
Mumbai: Stocks extended losses for the seventh straight session on Wednesday, in the biggest losing streak for the benchmark Sensex since September, as subdued world equities continued to weigh on the index.
Investors also remained on the sidelines after the Reserve Bank of India (RBI) indicated that monetary conditions are likely to remain tight because of rising risks to inflation, even as it kept interest rates unchanged.
BSE’s 30-share Sensex closed 0.33% or 113.23 points lower at 34,082.71 points, while the National Stock Exchange’s (NSE) 50-share Nifty shed 0.21% or 21.55 points to close at 10,476.70 points. While the market started on a positive note, it fluctuated between positive and negative territories during the day.
Over the last seven sessions, around Rs8.93 trillion of investors’ wealth has been eroded from the Indian stock market, and the Sensex is down 6.06% from its peak of 36,283.25 points seen on 29 January. Since then, the MSCI EM index and MSCI world index have declined 7.24% and 6.10%, respectively.
“In the US market, there were a lot of leveraged positions with shorting liquidity, and going long on stocks, and with the unwinding, all trade is getting reversed. This may mean more pain. Even though a large part of pain is done, it may not be over as yet,” said Hemang Jani, senior vice-president and head of advisory desk at Sharekhan by BNP Paribas.
“Emerging markets, including ours, may feel the heat for now. However, it is not the end of the structural bull market for India. We haven’t seen a correction since the start of 2017, and this one hit us hard yesterday,” said Jani. “That said, it is too early to predict levels for now,” he added.
All the sectoral indices have logged losses so far in February, with BSE Realty index leading the decline. It has dropped nearly 8% in February. Twenty-eight of 30 Sensex stocks have declined so far this month. Mortgage lender Housing Development Finance Corp. Ltd shed the most with an 8.7% decline.
Meanwhile, domestic institutional investors (DIIs) returned in February, investing a net of nearly Rs2,000 crore so far this month, while foreign institutional investors (FIIs) pulled out a net of $52 million in the same period.
At its sixth bimonthly monetary policy review, the RBI raised its March-end Consumer Price Index (CPI) inflation forecast to 5.1% and projected an inflation range of 5.1-5.6% in the first half of the next fiscal year.
“RBI raising inflation forecast may also bother investors,” pointed out Jani.
However, from a long-term perspective, the outlook for emerging markets remains positive.
“The outlook for emerging markets remains quite positive. From a business cycle perspective, EMs are in an earlier phase compared to more advanced economies, implying a stronger ability to generate earnings amid generally contained inflationary pressure,” Hervé Lievore, senior macro and investment strategist, HSBC Global Asset Management, said in an email from Hong Kong on Tuesday.
The long-term structural growth story remains intact for the Indian market.
“The current dip seems a healthy correction and makes us re-emphasize buying on such dips; we reiterate our March 2018 Nifty target of 11,300,” IDFC Securities said in a note on Wednesday.
According to IDFC Securities, asset-heavy and export-oriented industries would do well as the global economy recovers.
It also believes that consumption being the strongest component of the GDP will continue to see growth impetus from retail credit, which it believes will continue in the near term, and recent reduction in tax rates for companies operating in the discretionary consumer sector will boost overall consumption.
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