Sensex tanks nearly 1,200 points: FPI selling, weak global cues drag markets

On Monday, Indian equities witnessed a sharp selloff, with the Sensex tumbling 973 points to close at 78,361.23, while the Nifty shed 229.90 points, ending at 23,774.85. Broader market indices fared worse, with smallcap and midcap indices falling by up to 2 per cent. The India VIX, a measure of market volatility, spiked 11 per cent, reflecting heightened investor anxiety.

Key triggers behind the market drop

1. Foreign portfolio investor (FPI) outflows: FPIs sold Rs 4,285 crore worth of Indian equities in January so far, adding to the selling pressure.

2. Weak global cues: Asian markets dropped up to 1.4 per cent as the U.S. dollar remained firm, bond yields stayed elevated, and crude oil prices surged to multi-month highs.

3. Earnings season jitters: Uncertainty over Q3 results led to caution among investors, particularly in banking and large-cap stocks.

4. ITC demerger impact: ITC’s hotel business demerger resulted in a Rs 27 adjustment in its stock price, contributing significantly to the Sensex and Nifty’s fall.

5. Emergence of HMPV cases in India: Two cases of human metapneumovirus (HMPV), a respiratory illness causing concern in China, were reported in Bengaluru. The virus, which currently lacks a vaccine, has sparked fears of a potential health crisis.

Sectoral performance and notable losers
Tata Steel, Kotak Mahindra Bank, Power Grid, Asian Paints, and Adani Ports saw declines of over 2 per cent. HDFC Bank dropped 1.56 per cent as it reported the third consecutive quarter of corporate loan shrinkage.

What lies ahead?
Market experts suggest a challenging macroeconomic environment, with elevated valuations and global uncertainty, could keep returns muted. CLSA has downgraded HDFC Bank from its India focus portfolio and reduced its overweight stance on banking.

Investors are advised to monitor earnings and global developments closely as the market navigates through these turbulent times.