Oil fall, global woes pull Sensex 418 points down

During the day, the two indices declined by up to 2.6 per cent and the Sensex and Nifty hit intra-day lows of 23,839 and 7,241, respectively.

The fall in Indian markets on Wednesday was in line with global markets. While Nikkei in Japan closed with a fall of 3.7 per cent, the Hang Seng in Hong Kong lost 3.8 per cent. Even premier indices Germany, France and UK were down by around 3 per cent in the afternoon trading hours.

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Equity markets across the world have been under pressure since the beginning of this month and the BSE Sensex has lost 7.87 per cent or 2,055 points. If that drop was initially led by fall in China, which witnessed trade suspension twice in a week after the country’s indices fell around 7 per cent, the continuing decline in global crude oil prices and foreign institutional investors pulling out money from the equity markets weakened the sentiments further.

According to data available with the BSE, foreign institutional investors (FIIs) pulled out a net Rs 1,324 crore from domestic equities and their overall net outflow for the month of January amounted to Rs 8,470 crore. However, despite the sharp FII outflow, the Indian equities have performed relatively better on account of support from domestic institutional investors (DIIs) who have invested a net of Rs 9,249 crore in the same period. On Wednesday DIIs invested a net of Rs 1,383 crore. As a result, even large blue-chip companies lost heavily.

While Adani Ports was the biggest loser on Sensex with a fall of 5.5 per cent, State Bank of India declined 5.1 per cent. Reliance Industries that announced strong third quarter result on Tuesday also fell 3.8 per cent.

While global concerns have weighed heavily on the Indian markets in the recent past, experts feel that India may outperform the markets worldwide on account of domestic strengths. If government spending is expected to lead the recovery along with crowing in private sector spending, a revival in earnings growth for India Inc may provide the recipe for a reversal in equity market movement. Some experts, however, say that the markets may remain under pressure in the short term.

“Expectations of the markets going downhill are likely to strengthen as the double whammy impact of oversupply in crude and the concerns in Chinese economy will dampen the investors’ preference towards equities. Stabilisation in the currency market and oil prices will be the focus area during the near-term,” said Vinod Nair, head of research at Geojit BNP Paribas Financial Services.

Jayant Manglik of Religare Securities, however, said that investors should continue to invest. “In current situation, traders should avoid leveraged trades and stick to strong companies for trading. Investors should continue to invest in quality companies for long term investment,” he said.