A sell-off in the banking counters and Reliance Industries Ltd (RIL) ripped 938 points off the Sensex on Wednesday, while the Nifty plunged below the psychological 14000-level.
The indices fell for the fourth straight session dragged down by outflows from foreign portfolio investors (FPIs), despite positive commentary on the economy from the IMF, which forecast a 11.5 per cent growth for the economy in 2021, the highest among the major economies.
Investors are displaying nervousness after the violent farmer protests in the capital on Republic Day amid heightened uncertainty on account of the budget on February 1.
Analysts said the equities could see more volatility as the Budget day nears, though they admit the current selling is healthy for the markets.
Both domestic and global factors were not conducive for a rally on Wednesday. Overseas stocks remained under pressure ahead of the US Fed meeting and uncertainty over the US stimulus.
Back home, market heavyweight RIL faced rough weather over concerns of its deal with Future Group after Amazon.com Inc moved the Delhi high court to block the acquisition.
The markets were also somewhat disappointed with the company’s third quarter results. The stock fell 2.66 per cent in intra-day trades to a low of Rs 1,888 after which it recouped some losses to close at Rs 1,895.25 — a drop of 2.29 per cent over its last close.
This is the second consecutive trading session that RIL is among the worst-performing stocks in the Sensex.
According to investment bank Macquarie, this may just be the beginning of the downfall for the oil-to-telecom conglomerate.
In a recent report, Aditya Suresh and Abhinil Dahiwale of Macquarie cut their EPS (earning per share) estimate for RIL by 3 per cent with a 12-month target price of Rs 1,350 even as it maintained the underperform rating.
“With RIL’s shares today trading near our fundamental blue-sky valuation, we continue to flag a significant negative risk-reward skew in the face of potential execution challenges’,’ they added.
The Sensex on Monday opened marginally higher at 48385.28, but could not sustain the gains for long as investors booked profits ahead of the F&O expiry on Thursday and the budget. Banking stocks witnessed the brunt of selling with Axis Bank leading the losers list as its shares fell by more than four per cent.
At close, the index tumbled 937.66 points or 1.94 per cent to settle at 47409.93 – taking the aggregate four-session loss to 2382.19 points or 4.78 per cent. Intraday, the gauge swung 1117.65 points.
Likewise, the NSE Nifty tanked 271.40 points or 1.91 per cent to close the session at 13967.50. Over the last four sessions, the 50-share index has lost 677.20 points or 4.62 per cent.
