FPIs are gripping the market for the sixth day; Sensex ends 639 points lower

4 minutes of reading Last update: October 7, 2024 | 21:09 IST

Benchmarks S&P BSE Sensex and National Stock Exchange Nifty fell for the sixth consecutive session on Monday amid sustained selling by foreign portfolio investors (FPIs).

Concerns about modest corporate earnings growth and the U.S. Federal Reserve’s (Fed) interest rate cut trajectory have heightened investor concerns.

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The domestic market is struggling with the relocation of foreign fund flows to China and the consequences of the Iran-Israel conflict.

The Sensex ended the session at 81,050, down 639 points or 0.8%. The Nifty index closed at 24,796, down 219 points or 0.9%. The total market capitalization of BSE-listed companies declined by Rs 8.9 trillion to Rs 452 trillion.

In the last six sessions, Nifty has fallen 5.4 per cent while Sensex has fallen 5.6 per cent.

FPIs sold shares worth nearly Rs 8,300 crore, taking their monthly sales to nearly Rs 40,000 crore. Domestic institutional investors bought shares worth Rs 13,245 crore, the highest single-day purchase.

In a note, Motilal Oswal Financial Services estimated Nifty earnings to grow marginally by 2 percent in the quarter ended September, which would be the lowest growth in 17 quarters.

Additionally, news reports that CLSA was reducing its exposure to India while increasing its exposure to China weighed on sentiment.

Globally, strong U.S. employment data last week prompted investors to withdraw bets on the Fed cutting interest rates in November. U.S. nonfarm payrolls rose by 254,000, the most in six months, the unemployment rate fell to 4.1 percent and hourly wages rose.

The wages report eased fears that the U.S. labor market is deteriorating; however, it dispelled hopes for significant interest rate cuts. The yield on the 10-year U.S. Treasury rose to 4 percent for the first time since July 31.

Last week, U.S. Fed Chairman Jerome Powell indicated that the Fed would cut interest rates if incoming data showed the U.S. economy was slowing less, suggesting a slower pace of rate cuts.

The Nifty IT index rose 0.6 percent as the jobs report allayed fears of the US economy slipping into recession as IT companies earn a significant chunk of their revenue from the US.

“US employment data was strong and a rate cut by the Reserve Bank of India was possible a few weeks ago, but that now seems unlikely. There was ample liquidity a few weeks ago, but that is no longer the case and valuations will need to be adjusted if yields moderate,” said Andrew Holland, CEO of Avendus Capital Public Markets Alternate Strategies.

The sharp outflow of foreign funds has raised concerns that funds are withdrawing from India to China on the back of improved valuations and an aggressive stimulus package announced by the Chinese government. Some market experts, however, suggest that the boom in China may end sooner rather than later.

“Since 2020, the recovery in Chinese markets has lasted an average of two months before resuming a downtrend, pushing them back into oversold territory. However, results will probably slow down in September. Financials and some other sectors will do well, but energy and cement will be the drag. Monsoons have impacted consumption in some sectors and government spending has not picked up post-elections with urban consumption slowing down,” said Amar Ambani, executive director, Yes Securities.

Brent crude oil prices reached $80 per barrel for the first time since August 16, 2024. Oil prices have risen steadily for seven days as investors assess whether Israel will attack Iranian oil trading facilities and whether the conflict will block the Strait of Hormuz.

Market breadth was weak with 3,493 shares falling and 568 gaining. The broader Nifty Midcap 100 and Smallcap 100 indices fell 2% respectively. and 2.75 percent

First publication: October 7, 2024 | 21:09 IST