Mumbai: After crashing through 1,000 points during the day as part of a global sell-off triggered by Wall Street’s worst decline in eight months, India’s benchmark Sensex index recouped some of the losses on Thursday, closing 760 points lower.

The 30-share BSE Sensex closed 2.19%, or 759.74 points, lower at 34,001.15, while the National Stock Exchange’s (NSE) 50-share Nifty closed 2.16%, or 225.45 points, lower at 10,234.65 points. It was Sensex’s lowest closing level since 11 April and the Nifty’s lowest since 4 April.

Earlier in the day, Sensex shed as much as 2.98% or 1,037.36 points to 33,723.53 points, while Nifty dropped as much as 3.07% or 321.50 points to touch 10138.60.

With this, Sensex and Nifty have erased all gains for 2018, and are currently 0.16% and 2.81% lower, respectively, for the year to date. “The strength in the US market was driven by a handful of stocks," said Hemang Jani, senior vice president and head of advisory at Sharekhan by BNP Paribas.

“The US market went through a corrective phase, on doubts whether high valuation in select few stocks that drove the market higher were justified or not," added Jani. “Indian markets are now dealing with dual problems—their own macro-economic worries, and now the global woes. I believe the weak sentiment will prevail for a while."

Market undertone continues to be cautious.

“We have to watch out how global markets pan out. Is the correction in world stocks here to stay? Inflows or outflows into emerging markets will be dependent on that," said Unmesh Kulkarni, managing director and senior adviser at Julius Baer India.

Kulkarni pointed out that Indian companies’ valuations were stretched a while ago, but the premium is now contracting quite significantly. According to Bloomberg, Sensex now trades at 16.39 times one-year forward P/E (price to earnings), closer to its five-year average of 16.25 times. At the start of the fiscal year, it traded at 17.4 times one-year forward P/E.

“However, there are enough headwinds: global cues, oil and rupee. Hence, volatility may continue for now. A V-shaped recovery is not very likely as macroeconomic risks persist," warned Kulkarni. “The upcoming state elections are also weighing on the market, and investors should be cautious for now."

Indian stock markets have seen a sharp correction since last week due to surging crude oil prices, a weakening rupee and concerns over serial defaults by Infrastructure Leasing and Financial Services Ltd (IL&FS).

Foreign institutional investors (FIIs) have sold a net of $3.9 billion of Indian shares in the year so far, while domestic institutional investors (DIIs) have bought a net of 94,483.26 crore of Indian equities in the same period.

Provisional data from NSE showed FIIs sold a net of 2,869.41 crore of Indian shares on Thursday, while DIIs bought a net of 1,888.18 crore.

Market breadth improved at close with the advance-decline ratio at 1:1.3 on the BSE, compared to 1:5 in early trade. BSE metals index and BSE IT index shed the most, dropping 3.77% and 3.21%, respectively.

Among Sensex stocks, Infosys Ltd contributed the most to the losses, with a 3.61% decline. Housing Development Finance Corp. Ltd followed with a 3.04% drop.

Tata Consultancy Services Ltd (TCS) erased 3.10% ahead of its quarterly earnings announcement.

TCS kicked off the fiscal second-quarter earnings season by reporting its fastest sequential growth in over four years.

In constant currency terms, TCS’s September quarter revenue rose 3.7% from the preceding three months. It grew 10% from a year earlier.

Ravindra Sonavane contributed to this story

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