Sensex falls 1,170 points on global cues, valuation concerns

Mumbai: Negative global cues as well as foreign fund outflows and concerns over high valuations dragged India’s key equity indices — S&P BSE Sensex and NSE Nifty50 — deep into the red on Monday.

Monday’s fall was the fourth consecutive session of slide.

In terms of global markets, the return of Covid-19 restrictions in Europe and concerns about an earlier than expected rate hike by the US Federal Reserve amid high inflation have put the investors on guard.

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Besides, oil prices touched several weeks low as Japan might release supply from its reserves. On the domestic front, realty, oil and gas, consumer durables and auto have fallen the most.

Consequently, the 30-scrip Sensex fell sharply to 58,465 points, down by 1,170.12 points or 1.96 per cent.

Similarly, the broader 50-scrip Nifty closed the day at 17,416 points, down 1.96 per cent or 348.25 points. It touched an intra-day low of 17,280 points.

“Subdued listing and continuation of weak trading of Paytm, India’s largest new generation fintech, is a big sentimental setback to the domestic market, which was thriving on the strong primary market. It will impact the inflow of money from the retail segment, which has been a key player during the year,” said Vinod Nair, Head of Research at Geojit Financial Services.

“FIIs are also a seller due to fear of overvaluation of India compared to its peers. Weak inflow from FIIs will possibly get higher due to the withdrawal of the three farm laws, which brings a stoppage to the government’s reformist agendas ahead of the state elections next year. It was a key factor for India to trade at a premium to EMs during the year,” Nair added.

According to Deepak Jasani, Head of Retail Research at HDFC Securities: “Valuations concerns have resurfaced among FPIs even as new age IPOs come under severe selling pressure. Concerns over government taking a step back on its reform agenda on the farm laws, negative newsflow from Reliance and Paytm’s relentless fall spooked the sentiments in a market where other worries of inflation and interest rates are already taking a toll.

“A resurgence of Coronavirus outbreaks in the US, Europe and some other regions is weighing on the investor sentiment. Comments by advisers to the Chinese central bank about risks of ‘stagflation’ have reinforced concerns about inflationary pressures.”

Siddhartha Khemka, Head of Retail Research at Motilal Oswal Financial Services, said: “Cancellation of the Reliance-Aramco deal, withdrawal of farm laws, persistent selling by FIIs and disappointment from Paytm’s listing dented market sentiments and led to free fall in the market.

“Overall, the market is likely to continue with its consolidation as valuations are rich while global cues are keeping the markets volatile — inflation concerns have dominated headlines and the Fed is starting the tapering programme soon. Investors would also be eyeing the Covid situation in Europe and its impact on the economic activities.”

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