Active Stocks
Thu Mar 28 2024 15:59:33
  1. Tata Steel share price
  2. 155.90 2.00%
  1. ICICI Bank share price
  2. 1,095.75 1.08%
  1. HDFC Bank share price
  2. 1,448.20 0.52%
  1. ITC share price
  2. 428.55 0.13%
  1. Power Grid Corporation Of India share price
  2. 277.05 2.21%
Business News/ Market / Stock-market-news/  Prospect of oil price shock fuels sell-off in stock markets
BackBack

Prospect of oil price shock fuels sell-off in stock markets

FIIs turn sellers on Nifty as Yemen conflict stokes concerns about security of West Asian oil shipments

The Sensex closes 2.33%, or 654.25 points, lower at 27,457.58, while the 50-share CNX Nifty falls 2.21%, or 188.65 points, to end at 8,342.15, amid monthly derivatives expiry. Photo: Hemant Mishra/MintPremium
The Sensex closes 2.33%, or 654.25 points, lower at 27,457.58, while the 50-share CNX Nifty falls 2.21%, or 188.65 points, to end at 8,342.15, amid monthly derivatives expiry. Photo: Hemant Mishra/Mint

Mumbai: Indian shares fell for the seventh day in a row on Thursday, pushing the benchmark BSE Sensex to its lowest close in two months, as escalating tension in West Asia and a rise in the crude oil price spooked investors.

The sell-off by investors paring risky bets also came ahead of the expiry of monthly derivative contracts.

The 30-share BSE Sensex fell 654.25 points, or 2.33%, to 27,457.58. The 50-share CNX Nifty of the National Stock Exchange fell 188.65 points, or 2.21%, to 8,342.15 points. It was the lowest close since 14 January for both the indices.

The market breadth was negative, with losers outnumbering gainers 2.1:1. The market capitalization of companies listed on the BSE fell 1.71 trillion below the 100 trillion mark.

Warplanes from Saudi Arabia and Arab allies struck Shi’ite Muslim rebels fighting to oust Yemen’s President on Thursday, in a major gamble by the world’s top oil exporter to check Iranian influence in its backyard without direct military backing from Washington, Reuters reported.

The action stoked concerns about the security of oil shipments from West Asia. In reaction, the price of Brent crude oil soared more than 4% towards $59 per barrel.

India imports about three-quarters of its energy needs and crude’s 43% slump in the past year has helped ease inflation, paving way for two interest rate cuts since the start of the year.

“The threat of the war in the Middle East is creating some disturbance and there are worries of some withdrawal in global liquidity," said Deven Choksey, managing director and chief executive officer of K.R. Choksey Shares and Securities Pvt. Ltd.

The Sensex has fallen 6.5% in March, headed for its biggest monthly retreat since November 2011. The decline came partly on concerns that higher US interest rates may trigger outflows.

As per provisional data on the National Stock Exchange, foreign institutional investors (FIIs), who have been net sellers of Indian shares in only five sessions so far this month, sold a net of 521.23 crore of Indian equities on Thursday.

Domestic institutional investors were net buyers of 687.09 crore of the asset class on the day.

“FIIs have an over-exposure in the Indian markets, and a part of their weightage is in banks," Choksey added, pointing out that banking stocks were the primary losers.

In a note on Wednesday, financial services firm JPMorgan said Indian equities had been outsized beneficiaries of easy global liquidity and soft global growth, and as a consequence, FIIs now own 21% of Indian equities versus 14% before the global financial crisis of 2008.

In addition, the extent of overweight positions on Indian equities that emerging market investors are currently running is at an all-time high of 12% compared with the benchmark MSCI Emerging Markets Index weight of 7.7%, JPMorgan said in its note.

So far in 2015, FIIs—the key drivers of Indian equities—have pumped in a net of $5.8 billion in the asset class.

After Thursday’s decline, the Sensex is now down 0.15% so far this year, and is the worst performer among major world markets after Turkey’s BIST100 Index, which has slumped 5.38%, and the US Dow Jones Industrial Average, which has logged a 0.59% decline.

In Thursday’s trading, the BSE IT index was the top sectoral loser, with a 2.63% decline, and the BSE Bankex followed with a 2.52% drop. Financial stocks contributed the most to the losses on the Sensex.

Mortgage lender Housing Development Finance Corp. Ltd fell 5.32%, while private-sector lenders ICICI Bank Ltd, HDFC Bank Ltd and Axis Bank Ltd shed 2.9%, 2.58% and 3.03%, respectively. Software makers Tata Consultancy Services Ltd and Infosys Ltd shed 2.32% and 3.30% respectively.

Only four Sensex stocks closed in positive territory on Thursday. Among the key gainers, Bharti Airtel Ltd rose 0.98% to 398.70 and Larsen and Toubro Ltd rose 0.18% to 1,636.

“This is the (financial) year-end effect, and there was also (derivatives) rollover, and many people would settle positions today, and enter the market again in the new year," said Raamdeo Agrawal, joint managing director of Motilal Oswal Financial Services Ltd.

Lacklustre corporate earnings have also been a key concern and market participants do not see a significant recovery taking place any time soon.

In a note on Thursday, HSBC Securities and Capital Markets (India) Pvt. Ltd said the market consensus is for corporate earnings per share growth to accelerate to 16% in 2015 and 18% in 2016. But the 2015 earnings expectation could be at risk of being missed amid a slower-than-anticipated recovery in capital spending.

To be sure, experts say the long-term structural story of Indian markets is intact and that the current correction as a temporary phenomenon.

“Corporate earnings are likely to be disappointing. That said, there is decent pace of activity going on from the government's end. They are on track for meeting expectations. There are global risks, though, and one can never control them," said Agrawal. “However, I would think it is a correction phase before the market picks up again in the new (financial) year," Agrawal added.

Ravindra Sonavane and Bloomberg contributed to this story.

Unlock a world of Benefits! From insightful newsletters to real-time stock tracking, breaking news and a personalized newsfeed – it's all here, just a click away! Login Now!

Catch all the Business News, Market News, Breaking News Events and Latest News Updates on Live Mint. Download The Mint News App to get Daily Market Updates.
More Less
Published: 26 Mar 2015, 01:49 PM IST
Next Story footLogo
Recommended For You
Switch to the Mint app for fast and personalized news - Get App