Foreign portfolio investors experienced their highest-ever single-day selloff on January 17, turning net sellers of Indian equities after two consecutive days of buying. According to provisional data from the National Stock Exchange, FPIs sold equities amounting to Rs 10,578.1 crore. The previous record for the highest single-day selloff was Rs 9,691 crore, observed on November 3, 2017, as noted by Deepak Jasani, Head of Retail Research at HDFC Securities.
On Wednesday, world stocks and bonds faced declines as central banks resisted expectations of interest rate cuts. The economic recovery in China, signaling inconsistency, led to a nearly five-year low in shares in the world's second-largest economy. The Indian government announced plans to sell a 3.5 percent stake in power producer NHPC at a floor price of Rs 66 a share, aiming to generate Rs 2,300 crore for the exchequer over January 18-19. Asian equities showed mixed performance on Thursday after a drop in US stocks and Treasuries, driven by robust retail sales data, raised doubts about a potential rate cut by the Federal Reserve in March.
On January 17, Nifty experienced a substantial decline, marking its most significant intraday fall since June 13, 2022, primarily due to widespread panic selling, especially in bank shares. Nifty closed 2.09 percent lower at 21571.9. The day witnessed a bearish island reversal pattern as Nifty fell with a down gap. A breach below 21,449 could lead Nifty towards 20,977, with 21,851 acting as a resistance. While the broader market did not witness panic selling, a potential acceleration in the down move could occur if sentiments worsen.
Elevated valuations made the market susceptible to a sell-off and HDFC Bank's disappointing results on Wednesday served as a trigger. V.K. Vijayakumar, Chief Investment Strategist at Geojit Financial Services, highlighted that the sell-off extended to other emerging markets like Taiwan and Korea, suggesting it's an emerging market correction driven by FPI outflows. The FPI sell figures in India on Wednesday were substantial at Rs 10,578 crore. With rising bond yields in the US, FPIs may continue selling, although DII buying in fairly valued large caps with growth potential could counterbalance this trend. Investors might adopt a wait-and-watch approach for the turbulence to subside. The resilience of IT stocks in the market crash indicates the sector's strength. Besides IT, large caps like RIL, ICICI Bank, L&T and Bharti possess the strength to navigate through the turbulence. Further dips in HDFC Bank could present buying opportunities for long-term investors. BSE Sensex recorded a 330-point decline on Thursday, trading at 71,170 points, with top losers including Asian Paints, NTPC, HDFC Bank, and Powergrid down by 2 percent.