Indian stocks fell the strongest in four months on Thursday as the fragile global economic recovery threatened to stall amid the resurgence of coronavirus cases and a new geopolitical hotspot in East Asia.
The benchmark indices fell 3%, led by financials. The National Stock Exchange’s Nifty has passed the 11,000 psychological mark.
The Sensex ended at 36,553.60, down 1,114.82 points, or 2.96%. The 50-share Nifty index was at 10,805.55, down 326.30 points, or 2.93%.
Foreign investors sold a net $ 807.4 million £Previous Indian stocks valued at 5,950 crore), which helped the Indian rupee fall 0.45% against the dollar, Bloomberg data showed.
On Thursday the rupee fell 32 paise against the US currency to 73.89 as the outflows of foreign funds weighed on investor sentiment.
Volatility in Indian markets is likely to continue for some time and is poised for a correction after a rapid rebound from March lows as rising stock prices made investors nervous in a weak economy, analysts said.
“Although domestic markets have been under selling pressure mainly due to global peers, further weakness is to be expected. In similar scenarios, markets typically drop in the 10-15% range from their peak, ”said Pankaj Pandey, research director at ICICIdirect. “The result of the US presidential election may increase nervousness in India.” However, he added that the current corrections are good as stock valuations were ahead of fundamentals. Rising cases of the novel coronavirus and the Federal Reserve’s warning of a fading recovery remained the top cause of concern among investors around the world.
MSCI’s broadest index for stocks in Asia Pacific ex Japan fell 1.93%. South Korea’s Kospi fell 2.59% when North Korean forces shot and killed a South Korean official who went missing this week and then set his body on fire, likely to prevent a coronavirus outbreak.
Hong Kong’s Hang Seng fell 1.7% and Japan’s Nikkei fell 1.11%.
The US Federal Reserve said Wednesday that the US economy remained in a “deep hole” of unemployment and weak demand and called for more fiscal stimulus, noting that policymakers “won’t even start over one.” Thinking about rate hike “until inflation hits 2%.
Meanwhile, the Indian markets have fallen by around 9% from the high on August 31 in the period after the end of March.
During this period, Indian stocks showed resilience despite mounting coronavirus cases, geopolitical tensions and economic slowdown. While the disconnect between the economy and stock markets is not uncommon, the extent to which the stock market rebounded had taken analysts by surprise.
“Our investment committee anticipates that the stock market will experience some downward pressure in the coming weeks as a profit posting may set in. However, over the medium term, we continue to expect positive returns from stocks as we believe stocks as an asset class should be supported by the ultra-loose monetary policies of major central banks. We encourage investors to take advantage of this weakness to gain exposure to large private sector banks from a 12 to 18 month perspective, ”said Credit Suisse Wealth Management, India, in a statement on September 15, 12.32%, indicating that the market correction may take longer.
“The breadth of the market is extremely weak and extremely oversold,” said Shrikant Chouhan, executive vice president, equity technical research at Kotak Securities.
Chetan Ahya, chief economist and global chief economist, said investors need to keep an eye on US fiscal policy, election uncertainty and the risk of a potentially severe wave of Covid-19 infections and deaths that could force policymakers to take more drastic cutbacks seize. and idiosyncratic political risks in emerging economies excluding China.
Reuters contributed to the story