Indices drop for third day in a row amid concerns over economic recovery

India’s benchmarks fell for the third day in a row on Thursday, amid losses by index heavyweights Reliance, Infosys and TCS, amid investor concerns over high valuations and the impact of inflation on earnings from businesses and economic recovery. A rally in bank stocks helped offset some losses.

After dropping up to 774 points, the Sensex ended the session down 336 points, or 0.5%, to 60,923, while the Nifty dropped 89 points to close at 18,178. Over the past three sessions, the Sensex lost 842 points, or 1.4%, while the Nifty lost 299 points, or 1.6%. The Nifty Midcap 100 and Nifty Smallcap 100, on the other hand, plunged nearly 6% in three days.

Domestic Institutional Investors (DII) have sold shares worth around Rs 9,000 crore in the past nine trading sessions. On Thursday, DII turned net buyers to the tune of Rs 428 crore, but foreign portfolio investors (REITs) sold shares worth Rs 2,819 crore, bringing their nine-day sale total to Rs 4 482 crore.

Market watchers said retail investors continued to remain strong buyers in the market in an attempt to “buy down”. However, they have not been able to offset the massive sales of DIIs and REITs over the past few days. If the markets continue to correct, retail investors could also turn to sellers, adding further downward pressure on the market, experts said.

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Prior to the latest correction, the Sensex and Nifty had gained for seven consecutive trading sessions, posting record highs of 61,766 and 18,477, respectively.

Institutional investors are urged to take money off the table given the sharp rise seen last week, analysts said. Profit-taking was greater in some pockets that had seen frantic buying.

Global brokerage firm UBS said in a note on Wednesday that Indian stock valuations have become extremely expensive and the market has become unattractive.

“Markets should continue to consolidate given the weakness in global indices, the ongoing earnings season and high valuations. Profits reported so far have been mixed with cost inflationary pressure visible on margins. Since valuations are now at absurdly higher levels, many stocks are valued perfectly, leaving very little room for disappointment, ”said Siddhartha Khemka, Head of Retail Research at Motilal Oswal Financial Services.

In addition, concerns persist about the impact of rising commodity prices on corporate profitability. Brent crude was trading at $ 84.37 a barrel on Thursday, nearing its highest level in three years. In addition, rising bond yields, both nationally and in the United States, have made the risk / reward ratio unfavorable, analysts said.

Globally, inflation, supply chain challenges and concerns about Evergrande kept investors spellbound. The Volvo Group has warned investors that the global semiconductor shortage and supply chain issues will hamper its production. At the same time, Nestlé and Procter and Gamble told investors they could raise product prices to meet higher costs.

There was some volatility in Asian markets after Evergrande revealed that its plan to sell its real estate services division had failed. Action resumed Thursday after a two-week suspension.

Market width improved on Thursday, with 1,694 shares falling and 1,589 advancing on the NSE. More than two-thirds of Sensex shares have fallen. Asian Paints was the worst performing Sensex stock, falling 5.2%. Reliance Industries fell 2.8% and lowered the Sensex by 224 points. Reliance will report its results on Friday after market hours. Bank stocks provided some support to the market. Kotak Mahindra Bank gained the most with 6.5%. HDFC and ICICI Bank gained more than 1 percent each.

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