Benchmark equity indices, after remaining listless for most of Friday’s trading session, tumbled following foreign portfolio investors’ net sales of Rs 21,106 crore — the highest ever recorded in a single session. The sharp sell-off was triggered primarily by the India Meteorological Department (IMD) lowering its monsoon rainfall forecast for the upcoming season. There was also significant action in select stocks during the final hour of trade as the rebalancing of the MSCI Global Standard Index came into play, said market experts.
The Sensex and the Nifty declined by 1,092 points and 359 points to close at 74,775.74 and 23,547.75, respectively, marking losses of 1.44% and 1.50%. The negative sentiment spread to the broader market as well, with the BSE Midcap and the BSE Smallcap falling 493 points (1.04%) and 437 points (0.82%), respectively.
While FPIs were net sellers, domestic investors were net buyers of shares worth `16,764 crore. Investor wealth eroded by Rs 4.47 lakh crore during the day.
Market breadth turns negative
Market breadth remained sharply negative, with 1,611 stocks advancing against 2,673 declining, resulting in an advance-decline ratio of 0.60. Twenty-two of the 25 sectoral indices ended in the red, with only IT and telecom stocks closing higher. Oil & gas, metals and utilities were among the biggest laggards. The IT pack led the gainers, driven by gains in Tech Mahindra, HCLTech and Infosys, along with Larsen & Toubro. Stocks witnessing the steepest declines included InterGlobe Aviation, Power Grid, NTPC, Bajaj Finance and Mahindra & Mahindra.
Siddharth Khemka, head of research at Motilal Oswal Financial Services, said the weakness to the revised monsoon forecast and uncertainty surrounding US-Iran negotiations was accentuated as the MSCI Global Standard Index rebalancing came into effect, triggering heightened volatility in select stocks amid expected passive fund flow adjustments and portfolio rebalancing activity.
According to him, the lower monsoon forecast could remain a key domestic overhang for rural and agriculture-linked sectors.
Vinod Nair, head of research at Geojit Investments, said fears of inflation had intensified due to the deficient monsoon forecast. However, he noted that the downside risk had been partly offset by the recent moderation in crude oil prices and bond yields.
Profit booking hits broader market
Nandish Shah, deputy vice-president at HDFC Securities, attributed the decline in mid- and small-cap stocks to profit booking following the recent rally in the segments. Looking ahead, market participants expect several key events to shape sentiment next week. Khemka said the RBI’s monetary policy meeting, developments in US-Iran negotiations, movements in crude oil prices and shipping activity through the Strait of Hormuz would be closely watched. “Benchmark indices are likely to remain range-bound next week, although select mid- and small-cap stocks could continue to outperform on the back of healthy earnings momentum and strong domestic liquidity,” he added.
Nair also added the RBI’s policy decision and GDP data release would provide further clarity on the inflation trajectory and overall economic momentum, making them key areas of investor focus. He added that the macroeconomic backdrop appears better than it was a fortnight ago, but confirmation would depend on policy clarity, monsoon normalisation and geopolitical de-escalation.
