Sensex slumps over 1,200 points today. Key factors driving the selloff
In the current leg of the FII-led selloff, investor wealth worth ₹6 lakh has been wiped out in just three sessions as Sensex came under heavy selling pressure
PremiumIndian stock markets today extended losses as the session progressed with Sensex down over 1,200 points when it slumped to 57,424 at day's low. The Nifty was struggling to hold 17,150 levels amid strong selling pressure in Bajaj Finance, Bajaj Finserv, HDFC and HDFC Bank. India's bond and forex markets were shut, while the central bank has rescheduled its monetary policy committee meeting by a day to February 8-10, citing a public holiday in Maharashtra.
Among the Sensex stocks, FII favourite stocks such as HDFC, HDFC Bank, Bajaj Finserv and Bajaj Finance were down between 3% and 3.5%.
“Indian market is witnessing a sharp cut in today's trading session and this weakness can be attributed to heavy selling by FIIs amid rising US bond yields and crude oil prices. If we look at the profile of the stocks then there is a sharp cut in FIIs' favorite names and heavyweights like HDFC twins, ICICI Bank, Infosys and Kotak Bank. Therefore we can expect large FIIs' selling figure in today's trading session however there is good buying in PSU banks, metal stocks and sugar stocks where earnings were strong, " said Santosh Meena, Head of Research, Swastika Investmart Ltd.
"If we talk about domestic cues then the budget was good and earning momentum is strong but the important question: "is the market looking nervous ahead of state elections?" Technically, Nifty has slipped below its 50-DMA which is not a good sign however 1,7200 is a support level where we can expect some recovery otherwise selling pressure may get momentum towards 17,000/16,800 levels. On the upside, 17450-17500 will act as a strong resistance now."
In the current leg of the FII-led selloff, investor wealth worth ₹7 lakh has been wiped out in just three sessions.
European stock markets were mixed today. Investors were cautious of growing bets on larger Federal Reserve interest rate hike after a data on Friday showed that U.S. created more than expected jobs in January.
U.S. inflation data for January is due on Thursday and strong data could further fuel Federal Reserve's plan to raise interest rates after the U.S. employment report showed nonfarm payrolls jumped by 467,000 jobs last month.
“The spike in US 10-year bond yield to 1.91% reflects the increasing concerns of high inflation and the Fed being behind the curve. The January jobs report in the US at 4.67 lakh new jobs was way ahead of market expectations. Now it is beyond doubt that the Fed will have to act tough on inflation. If the Fed turns highly hawkish and delivers a 50 bps rate hike in March, that can cause a sharp correction in markets," said VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services.
“FII selling is impacting the market in the short term, but not in the medium. FIIs have sold equity worth ₹114100 cr since October 2021. But the Nifty now remains where it was in early October 2021. FII selling is causing short-term gyrations but no significant impact in the medium term," he added.
Meanwhile, the three-day meeting of the Reserve Bank of India's monetary policy committee is set to end on Thursday. The RBI is expected to hold its repo rate steady on Thursday but several economists are expecting an increase in the reverse repo rate as part of a process to reduce surplus liquidity poured into markets earlier in the pandemic.
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