Indices fall to 2-month low on FPI selling, rising US bond yields
Benchmark indices fell over a per cent on Tuesday to their lowest in over two months on rise in US bond yields, sustained selling by foreign investors and disappointing domestic earnings.
Lofty valuations, tensions in West Asia and “Buy China, Sell India” trade have triggered an exodus of hot money this month.
Monthly selling by foreign portfolio investors in the cash market is nearing $10 billion, with the investors offloading another ₹3,978 crore on Tuesday, taking the October selloff to $9.95 billion.
The Sensex plunged 930 points or 1.15 per cent to settle at 80,220, the lowest closing level since August 14. The Nifty fell 1.25 per cent to 24,472. Mid and smallcap indices came under selling pressure falling between 2.5 per cent and 3.8 per cent.
All the sectoral indices ended in the red. Realty and PSU Banks tumbled over 3 per cent each while auto and metal indices fell more than 2 per cent. The Hyundai IPO had a lacklustre listing and closed with a loss of 7 per cent from the issue price.
“Rising US bond yield amid expectation of modest rate cut by US Fed led to weakness in global markets and outflow of funds from emerging markets like India. Q2 earnings are also showing signs of moderation which dented the sentiments,” said Siddhartha Khemka, Head – Research, Wealth Management, Motilal Oswal Financial Services.
The RBI’s latest bulletin upholds India’s GDP growth forecast of 7.2 per cent for FY25, suggesting that the Q2 slowdown is temporary, with festive season consumption expected to rebound and ease the pressure on earnings downgrades, said experts.
Vinod Nair, Head of Research, Geojit Financial Services, said: “Bearish sentiment continued to dominate the domestic market today amid heightened volatility, with small and midcap stocks taking the biggest hit. The recent sharp rise in US bond yields signals diminished expectations for aggressive rate cuts by the US Fed, also affecting fund flows to EMs. In the short term, this bearish outlook may persist due to sluggish earnings growth trends.”
Global cues were negative as well as investors evaluated quarterly corporate earnings amid uncertainty regarding global economic growth and interest rate trajectories. Markets in Japan and South Korea ended lower by more than a per cent while China and Hong Kong ended higher. European markets were trading lower.
Nifty is currently weakening after forming a new lower top around 25230 levels. The immediate resistance is at 24700.
“Traders should avoid taking long positions until there are clear signs of a bullish reversal. The midcap space, in particular, saw a sharp decline, breaking below key support levels, signaling more pain ahead; bottom-fishing should be avoided for now,” said Rajesh Bhosale, Equity Technical Analyst, Angel One.