The Indian equity benchmarks fell for seventh session in a row on Monday on fears of interest rate hike and flight of capital from equity to debt markets. Meanwhile, selling by foreign institutional investors (FIIs) have also led to money moving from emerging market equities to safety of US bonds which provide risk free return, analysts said.
India's 10 year bond yield surged to 7.45 per cent, its highest level since November, indicating nervousness in the market.
"India 10 year bond yield hits the high level of 7.45% which is the highest since November 22, this is an indication of nervousness in the market. In the last policy meeting, MPC refrained from giving forward guidance and retained the optionality to be on either side based on incoming data to change their stance to neutral on interest rates. The market is still worried about domestic inflation numbers and global issues like the Ukraine war etc., adding to discomfort with growth projections," said Jayesh Faria, Associate Director, Regional Head – West, Motilal Oswal Private Wealth.
Meanwhile, foreign institutional investors have turned cautious and pulled out Rs 3,666 crore from Indian equities so far this month, data from National Securities Depository Limited (NSDL) showed.
In the seven-day selloff that started on February 17, the 30-share Sensex has lost 3.31 per cent and Nifty 50 index has dropped 3.6 per cent or 643 points.
The selloff has been so intense that 45 out of fifty shares in the Nifty 50 basket have given negative returns.
Adani Enterprises was the top loser in Nifty 50 basket of shares. The stock has crashed 34 per cent as it continues to reel under selling pressure after US-based short seller Hindenburg Research levelled allegations of fraud, stock manipulation and improper use of tax havens.
Cipla, Mahindra & Mahindra, HDFC, IndusInd Bank, JSW Steel, Kotak Mahindra Bank, Titan, Bajaj Finserv, Nestle India, HDFC and HDFC Bank have also fell between 5-7 per cent.
On the other hand, NTPC, Divis Labs, Coal India, ITC, Ultratech Cement and Power Grid were among the notable gainers.
On Monday, Nifty briefly fell below its 200-day moving average of 17,350 but reversed from that level later in the day.
“Markets started the week on a feeble note and lost nearly half a percent, in continuation to the prevailing corrective phase. After the initial downtick, Nifty breached the budget day low of 17,353 levels and oscillated in a narrow band thereafter. Meanwhile, pressure in the IT, metal and auto majors kept the tone negative however resilience in the banking pack capped the damage. And, a fresh fall in the broader indices further deteriorated the sentiment,” said Ajit Mishra, VP - technical research at Religare Broking.
“The pressure in banking and financial majors was weighing on the sentiment during the initial phase of correction and now it’s cascading to the other sectors as well. Besides, the fall in the US markets is adding to the pessimism. Amid all, we feel it’s prudent to wait for a rebound for creating fresh shorts citing oversold positions and some resilience in select private banking names,” he added.
