Indian rupee coins are arranged for a photograph (Photographer: Prashanth Vishwanathan/Bloomberg News)

Investors In Nifty Stocks Lose Rs 3.22 Lakh Crore In Seven Days

Investors in Nifty 50 companies lost Rs 3.22 lakh crore as U.S. President Donald Trump’s tariff war escalation added to uncertainty caused by the general election.

The Nifty 50 fell 3.82 percent since April 26 in seven straight trading days, its longest stretch of losses in more than 11 weeks.

Indian markets scaled new highs after recovering from the rout triggered by IL&FS crisis. But as volatility rose with the elections, concerns about a slowdown in consumption and Trump’s threat to increase tariffs on $200 billion of Chinese pose fresh concerns.

Global traders have started pulling out money from other assets and have been investing in dollar amid renewed fears of the trade war, said Deven Choksey of KR Choksey Investment Managers. Election results will be important to watch out for, he said, adding that if BJP fails to get a strong majority, then markets could see further downside.

Foreign investors turned net sellers amid a global selloff. They offloaded equities worth Rs 1,702 crore in the secondary markets, as per NSDL data, even as domestic investors bought equities worth Rs 3,598 crore in the primary market.

The latest round of selloff, however, hasn’t made the Indian benchmark cheaper. While valuations have eased from their peak, Nifty still trades at 18.9 times its 12-month forward earnings compared with a five-year average of 18.4 times.

Choksey doesn’t see valuations as a concern given the economic and earnings growth in India. And he said the current fall will be arrested if the U.S. and China strike a deal.

He doesn’t expect the weakness in consumption to continue and sees the liquidity issues getting resolved soon.

UR Bhat, managing director at Dalton Capital Advisors, however, considers the valuations stretched as earnings growth is not commensurate. According to him, that has only added to the worries stemming from trade tensions, liquidity concerns and polls.

The selloff hurt the broader markets as well, with both mid- and small-cap indices falling in line with Nifty 50.

Heavyweights Drag Nifty Down

Only five Nifty stocks returned gains. And heavyweights, including Reliance Industries Ltd., ICICI Bank Ltd. and HDFC Ltd. dragged the index down. While the Nifty was down 456 points in the last seven sessions, 25 percent of that was contributed by Reliance Industries alone.

Futures & Options

Only 22 out of the 196 stocks in the futures and options market managed to return gains this series.

FIIs have been unwinding long positions on index futures since the start of the May series. FIIs have unwound 28,359 contracts on long side and added 39,539 contracts on short side.

May series so far:

  • Nifty 50 Index down 2.9 percent.
  • Nifty Bank Index down 2 percent.
  • India VIX Index (volatility index) up 11 percent.

“The index has broken support of 11,550 zones and drifted below its 50-day moving average. The next major key support is seen at 11,118. India VIX is at 38-month high,” Chandan Taparia, derivative and technical analyst at Motilal Oswal Financial Securities Ltd., said. “Participants waiting for election outcome now will position themselves.”

Also read: Nifty Rollovers: How Derivatives Market Positions Itself Ahead Of Election Outcome

Global Markets

Fresh trade tensions between the U.S. and China has led to a global selloff this month. China’s benchmark index Shanghai Composite has fallen the most at 8.6 percent, mostly after the Trump’s latest threat on May 6.

Sanjiv Bhasin, executive vice president, markets at IIFL, said the decline in Nifty 50 triggered by global selloff as a healthy correction and a buying opportunity. I don’t expect the India’s benchmark to fall below 11,250 points as this volatility will be short-lived,” he said, adding that select stock valuations may appear expensive, but the broader market is relatively reasonable. “Given the demographics of India, valuations would play out on the premium side. India would be the best place to be in the next six-months with political stability.”

JP Morgan also remains positive with a Nifty target of 11,500-12,000 by June-end, implying an upside of up to 8 percent. “The key triggers that drove our positive view in early November are sustaining and improving,” Bharat Iyer, analyst at JP Morgan, wrote in a note. “Our target returns for the broad markets are premised on a moderate recovery in earnings, even as valuations normalize gradually.”