The super 10 stocks, which have propelled the frontline indices to record highs, have been correcting since Friday as investors opted to take some risk off the table following rising geopolitical tensions in West Asia. If one excludes the export-driven companies from the Nifty50, the remaining companies have come off nearly 3% since Friday. A larger fall in the benchmarks has been arrested due to TCS, HCL and Wipro, which gained up to 4.5% in the period as investors bet on the falling rupee. Broader indices such as Nifty Midcap and Nifty Smallcap fell 1.8% and 1.4%, respectively.
The Bank Nifty lost over 1,000 points, or 3.3%, in the last four sessions since depreciating rupee and fears of rising inflation could pressure lenders’ investment portfolios.
Vaibhav Sanghavi, co-CEO at Avendus Capital Markets Alternate Strategies, said, “We don’t expect this volatility to continue for long and money may eventually come back. Also, oil is expected to remain subdued over long term. A sharp sell-off is unlikely if this does not convert into a full-scale conflict.”
Since Friday, the reaction in the market has been knee-jerk as rising oil prices can impact India’s finances. According to Nomura, every $10/bbl rise in oil prices presents an additional burden of Rs 1.04 lakh crore, which is 0.5% of GDP. Indian equities reacted sharply because growth has been slowing and the ability to absorb an oil shock is limited. The market capitalisation of SBI eroded as much as Rs 17,403 crore since Friday, followed by HDFC Bank, RIL, Bajaj Finance and HDFC. While the HDFC twins together lost Rs 26,547 crore in the last four days, RIL has seen a fall of Rs 14,041 crore in its Mcap.
Gaurav Dua, senior V-P and head – Capital Market Strategy & Investments at Sharekhan by BNP Paribas, said, “The direct impact of any geopolitical conflict in West Asia is limited for India. India would be hit by the rise in oil prices. After the initial reaction to news of a US airstrike killing the Iranian general, markets reacted sharply. After the initial reaction, markets have stabilised.”
Investors will now look for cues from the Budget starting next week. If oil stabilises at current levels, then markets could focus on domestic issues. While the Sensex on Wednesday closed marginally lower at 40,817.74, down 51.73 points, or 0.13%, the broader Nifty50 settled at 12,025.35 points, down 0.23%. FPIs offloaded equities for a third day in a row by selling shares worth $72 million on Wednesday, provisional data on exchanges showed.