Sensex, Nifty fall further on surging crude oil prices

Mumbai: There was no respite for the Indian markets as the free fall continued for the second straight session, with the rupee recording new lows and the benchmark Sensex declining by more than 800 points as the deteriorating macroeconomic scenario continued to worsen investor sentiment.

The rupee ended at 73.58 a dollar, down 0.33% from Wednesday’s close. In intraday trading, the local currency touched a fresh low of 73.82.

BSE’s 30-share Sensex plunged 806.47 points, or 2.24%, its biggest decline since 2 February, to close at 35,169.16. The National Stock Exchange’s (NSE) 50-share Nifty fell 2.39%, its biggest such decline since 11 November 2016, to close at 10,599.25.

The depreciating rupee, rising crude and liquidity fears have led to a collapse in investor confidence.

“There has been a complete turnaround in sentiment, triggered by a confluence of factors. It started off with IL&FS and its fallout on the NBFC sector, followed by the worsening macro with rising crude prices and falling rupee,” said Deepak Ramachandra, head of sales, India equities, Bank of America-Merrill Lynch. “The sentiment has turned to ‘sell the bounce’ than ‘buy the dip’ not so long ago.”

According to Ramachandra, with the rupee convincingly crossing 73 and oil getting costlier, there was no real reason for the market to rebound.

Provisional data from NSE shows that foreign institutional investors (FIIs) sold a net of ₹ 2,760.43 crore of Indian equities on Thursday, while domestic institutional investors (DIIs) bought a net of ₹ 1,823.59 crore of Indian shares.

FIIs have sold a net of $2.5 billion of Indian shares year to date, while DIIs have stocked up a net of ₹ 85,364. 69 crore of the asset class. “There are hardly any incremental FII buyers in the market. Domestic flows have turned sluggish, SIPs (systematic investment plans) have slowed and discretionary money is not getting into mutual funds,” said Ramachandra.

“To add to macro headwinds, we have key state elections later this year and then the Lok Sabha polls in May 2019. In such a situation, there is no compelling reason for new money to enter Indian stocks,” he added.

Short-selling added to investors’ woes. “Short-selling is happening across the market, with a lot of stocks seeing substantial addition in open interest, indicating that there is more pain in the offing,” said Ravi Sharma, assistant vice president, institutional equity (derivatives), Prabhudas Lilladher Pvt. Ltd.

In Thursday’s trading, for every share that advanced on BSE, more than two shares declined. All sectoral indices closed lower, with the BSE energy index and BSE oil and gas index declining the most. They shed 6.66% and 6.58%, respectively.

Reliance Industries Ltd fell 7%, contributing the most to Sensex’s losses. HDFC Bank Ltd followed with a 3.46% fall.

“FIIs are selling and they sell what’s saleable in the market. Their exit is driven by the threat of the rupee depreciating further,” said Deven Choksey, group managing director, KR Choksey Investment Managers Pvt. Ltd, adding that to protect their portfolios from currency loss (mark to market), FIIs are taking out funds from Indian markets, besides other markets. “Second, due to loss they have in other markets, they are selling their jewels in Indian markets for paying off those losses, incurred elsewhere.”

State-run oil marketing companies took a beating after the government announced a cut in excise duty on petrol and diesel by ₹ 2.50 a litre. Out of this, oil marketing companies were asked to bear a loss of ₹ 1 per litre.

Indian Oil Corp. Ltd, Hindustan Petroleum Corp. Ltd and Bharat Petroleum Corp. Ltd tumbled 10.57%, 12.23% and 10.89%, respectively.

Ravindra Sonavane contributed to this story.