Stocks wilt as Street vigil on polls raises fear factor

Amid steep volatility, weekly index option expirations and selling by foreign investors, the bellwether Nifty fell 1.55% to 21,957.5, its biggest one-day decline since January 17, while the Sensex fell 1.45% or 1,062 points to 72,404 or 72,404. This is January.

The Nifty’s top five losers accounted for nearly three-fifths of the index’s 345-point decline. Foreign portfolio investors (FPIs) posted a tentative net sale 6,994.86 crore shares.

Correction time

Correction may not be over yet: Huge bearish bets in Nifty and Bank Nifty futures contracts indicate that the fall may extend till the end of the month. Nervousness on the street was reflected by fear gauge India Vix closing at a 20-month high of 18.2.

Broader markets fared worse: Nifty Smallcap 250 fell 2.65% to 15,006.35, while Nifty Midcap 150 fell 1.74% to 18,245.35.

Domestic institutional investors made a temporary net-buy 5,642.53 crore, but selling by retail and high-net-worth investors added to the selling pressure. On BSE, the net-sold share price of this category 118.10 crore, while the figures were not available on the National Stock Exchange (NSE). Investors have seen their net worth erode 7.28 trillion.

“The pullback is due to uncertainty about the winning margin of current and in-line results amid high valuations in many pockets of the market,” said Andrew Holland, chief executive of Avendus Capital Public Markets Alternative Strategies. Hollande continues until the votes are counted, expecting pressure.

However, other analysts expect limited declines for the Nifty, with the index retreating 3.7% from a record high of 22,794.7 on May 3.

Geojit Financial Securities senior vice-president Gaurang Shah expects the market to find support at 21,800. He said short- to medium-term investors should book profits while “longer-term” they should use the correction as a buying opportunity.

“A correction before the event is good for the market. I am bullish energy, defence, banks, NBFCs (non-banking financial institutions) and autos are good buys,” he added.

HDFC Bank Nifty contributed 60 points, L&T 57 points, Reliance Industries 37.5 points, ITC 31.98 points and Asian Paints 14 points.

Push the pole

Ajay Bagga, independent market expert, attributed Thursday’s fall to “no discernible wave in elections, a moderate earnings season, overhang in key sectors like IT and financials, as well as sustained FII outflows. All these contributed to the India Vix shooting in the last 11 days. The price action was largely domestically-influenced, while the global situation remains mildly positive.”

The fall coincided with weekly Nifty options expiry, which saw put writers (bulls) cover their short positions, adding to the downward pressure.

Active Nifty futures contracts expiring on May 30 saw open interest (traders’ outstanding positions) rise 20% to 516,442 contracts, a sign of bearish sentiment. Open interest in the Bank Nifty futures contract expiring on May 29 rose 11.04% to 163,124 contracts. Options expiring next Thursday see the market trending towards immediate 21,830-22,300 levels.

The Vicks, according to Kruti Shah, quant analyst at Equirus, could rise to the 21-22% level as the poll results date approaches. He expects 21,700 to be a strong support for now.

FPIs have been selling shares so far this fiscal 19,084 crore (excluding Thursday’s provisional figure) while DIIs bought net 60,886 crore. According to Swaroop Mohanty, CEO of Mirae Asset MF, DII buying has been and will continue to be a “foil” for FPI selling.

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Published: 09 May 2024, 09:46 PM IST

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