The benchmark Sensex tumbled 1017 points on Friday amid reports of FPI sell-off to meet Sebi norms and nervousness among investors ahead of the release of US jobs data.

The 30-share gauge plummeted 1017.23 points or 1.24 per cent to end at 81183.93 as investor wealth worth ₹5 lakh crore disappeared during trading.

During intra-day trades, the index tanked 1219.23 points to 80981.93. On the NSE, the broader Nifty cracked 292.95 points or 1.17 per cent to close at 2852.15.

Market circles said expensive valuations coupled to lacklustre corporate earnings also led to the rout.

The US non-farm payroll data, released in the evening Indian time, showed fewer expected job additions in the previous month that led to muted reaction in the Wall Street in opening trade on Friday.

Analysts said the extent of the rate cut by the US Federal Reserve remained unclear from an assessment of the data

“The domestic market was in panic on Friday due to the Sebi’s deadline over FIIs disclosure norm. However, this is not expected to impact India’s lucrativeness to FIIs in the long-term.

“Coupled with lack of new market catalysts and elevated valuations, a muted trend is expected to continue in the short-term. Global markets are also adopting a cautious stance ahead of the release of the US non-farm payroll data,” Vinod Nair, head of research, Geojit Financial Services, said.

The overheated segments of the markets have seen some profit booking and may be an indicator that earnings would incrementally dictate price movements, Joseph Thomas, head of research, Emkay Wealth Management, said.

US data trend

The US labor market appears to have shifted into a lower gear, reinforcing concerns of limited hiring appetite among businesses.

Employers added 142,000 jobs in August on a seasonally adjusted basis, a weaker-than-expected showing for the second consecutive month. And totals for June and July were revised downward.

This jobs report — with hiring below expectations (bad) but unemployment ticking down (good) — could support either a quarter- or half-point rate cut from the Fed later this month, said Josh Jamner of ClearBridge Investments. “Investors will focus on next week’s inflation data as the final clue,” he said.

Chris Waller, a Fed governor, gave a speech on Friday with a little something for everyone. He avoided clearly committing to a big rate cut in September, but he did say that cooling data “requires action,” that he is open to “front-loading” rate cuts if “appropriate,” and that he is “open-minded about the size and pace of cuts”.

In short, Waller is alert to the fact that the job market is cooling, but he is holding off on committing the Fed to either a big or a small rate cut.

FPI fears

One of the reasons being cited for Friday’s crash has been Sebi rules on beneficial ownership of FPIs. Investors will have to bring down their equity holdings if they breach certain thresholds.

Market circles said that since this 180-day deadline will end on September 9, some of the FPIs may have pared down their holdings on Friday.

``Though most of the FPIs seem to have already adjusted their portfolios to cater to the Sebi rules, some may have sold stocks,’’ an analyst from a domestic brokerage said.

There have been reports that several FPIs who are in breach of the Sebi’s circular had urged for exemptions but were unable to get relief.

Provisional data showed FPI selling stocks worth ₹621 crore on Friday. However, domestic institutions were net purchasers of around ₹2,122 crore.

With inputs from NYTNS