MUMBAI: The sensex dropped 1.6% or 1,258 points to 77,965 on Monday as weak Dec quarter results led to concerns over economic slowdown. While banking and consumer sectors were the biggest drags, all major sub-sectors ended in the red. Small- and mid-cap indices declined around 3%, reflecting the extensive market downturn. The Nifty Bank index dropped 2.1% as public sector banks fell over 4%. Union Bank led losses, plunging 7.5% due to weaker sequential growth in deposits and business.
The sensex is down nearly 8,000 points or 9.3% from its Sept-end peak of 85,930. It is, however, still about 6,000 points higher than what it was on Jan 1, 2024.
"HDFC Bank and other key players posted headline figures that fell short of market expectations, raising concerns about the upcoming third-quarter earnings season. These disappointing results come at a time when the global macroeconomic environment is already weak, characterised by increased uncertainties and challenges. Further compounding the situation, the HMPV virus variant has heightened investor unease," said Narendra Solanki of Anand Rathi Shares & Stock Brokers.
Major laggards included HDFC Bank, Reliance Industries, Tata Steel, and NTPC. Dabur India fell 3.8%, citing a likely earnings miss, while ITC lost 2.8% following the spin-off of its hotels business. Diagnostic stocks were in focus amid concerns over HMPV virus.
Market breadth was weak, with 3,474 stocks declining and only 656 advancing. The volatility index rose to 15.7 - its highest since Nov - signalling increased risk aversion. Investors reacted to disappointing corporate earnings and global uncertainties, including the US Fed's hawkish stance and rising bond yields.
The rupee hit a record low of 85.83 against the dollar, exacerbating foreign investor concerns. FPIs sold equities worth Rs 4,227 crore, contributing to the negative sentiment. Brent crude dipped 0.3% to $76.3 per barrel, while stable commodity prices offered little support to the markets.
Sectorally, utilities led the declines, falling 4.2%, followed by power, services, and energy sectors, which each fell over 3%. Metal stocks also fell 3%, impacted by a stronger dollar and weak global demand.
Globally, weak trends in Asian and European markets added to the pressure, while US markets closed positively on Friday. Domestically, concerns over slowing discretionary spending and valuation adjustments affected consumer stocks. Broader indices breached critical 200-day moving averages, raising fears of further downside.
Investment banks Morgan Stanley and Goldman Sachs remain optimistic about India's long-term growth. Morgan Stanley projected an 18% rise in the sensex by Dec 2025. Key drivers include macroeconomic stability, private capital expenditure, and structural reforms.
According to a report by Morgan Stanley, India has outperformed emerging markets when the dollar index depreciated.
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