Global equity markets went into a freefall on Wednesday, as murmurs of an impending global recession and likely wave of debt defaults got louder.
Back home, the Sensex and Nifty shed 417.80 points and 125.80 points to end at the day at 20-month lows even as they pared intra-day losses slightly. Further hurting sentiment was the slide in the rupee, which fell to a 28-month low of 68.05 to the dollar intraday.
The Sensex breached the psychological 24,000 mark, falling to a low of 23,839.76, before ending at 24,062.04. The Nifty went as low as 7,241.50 before closing above the psychological 7300 mark at 7,309.30.
The bruising sell-off comes just a day after markets globally had rallied on Tuesday.
Key Asian markets opened weak and sentiment took a further beating when major European markets opened sharply weaker later in the day.
“You can get a bounce, you can get one good day, you can get two good days but the fundamental factors that are dragging the market down are not going to be resolved today, tomorrow, next week or next month,” warned Michael Every of RaboBank in an interview to CNBC-TV18, adding that he did not see any upsides for global equities near term.
Banking, metal and realty were among the worst affected sectors, falling 2-3 percent, as every single sectoral index on the BSE closed in the red.
Trading in around 400 BSE-listed stocks—mid and mostly small caps—was frozen after there were only sellers.
The ongoing meltdown in stock prices could be a good opportunity to accumulate quality stocks, feel some market experts.
“For some reason, market is going to extremely psychologically nervous and these are all interlinked,” value investor Ramesh Damani told CNBC-TV18.
“If you ask me about China and oil and interest rates and about earnings in India, I think there is reason to be optimistic rather than pessimistic,” he said.
ICICI Prudential AMC’s Chief Investment Officer S Naren feels this is a good time to buy large cap stocks as mid cap stocks still appear overvalued even after the correction.
Retail inflows into mutual funds fell sharply, and market experts say it could fall even more in the coming months till there were signs of stock prices stabilizing.
Naren says heavy selling by foreign institutional investors is no reflection on India’s fundamentals.
And yet, Indian equities are unlikely to be immune to a cataclysmic event globally, like was the case in 2008 as well when India’s economy was doing much better than most peers’.
William White, the Swiss-based chairman of the OECD’s review committee and former chief economist of the Bank for International Settlements (BIS), warns that the situation globally is quite dire.
“The situation is worse than it was in 2007. Our macroeconomic ammunition to fight downturns is essentially all used up,” he said in a discussion with UK’s Telegraph newspaper.
A survey of global fund managers by investment bank Bank of America Merrill Lynch found that only while investors are no longer in denial about bear market risks, they are yet to accept the fact that the global economy/markets may have already entered a bear phase.
Among frontline shares, Adani Ports, SBI, Coal India, Maruti, Tata Motors and Tata Steel were the big losers, tumbling 3-5 percent.
In second line shares, Vedanta, Sun TV, Den Networks, Cox & King, Reliance Communications, IL&FS Transportation and JSW Energy were among the big losers, shedding 6-8 percent.