Mumbai: The Indian stock market experienced a continued pullback for the fifth consecutive day on Monday. This decline occurred despite domestic institutional investors (DIIs) purchasing a larger volume of shares compared to their foreign counterparts (FIIs).
Recent figures indicate that foreign institutional investors exited their bullish positions on Nifty and Bank Nifty futures, liquidating nearly ₹8,000 crore worth of index futures contracts in addition to withdrawing cash investments, as per data from the National Stock Exchange (NSE).
On the cash front, DIIs bought a net total of ₹13,245.12 crore while FIIs sold off a net sum of ₹8,293.41 crore on Monday, according to data from the Bombay Stock Exchange (BSE). Despite these purchases by DIIs, the Nifty plummeted by 0.87%, closing below the critical psychological level of 25,000 at 24,795.75.
The primary factor contributing to this market decline was the liquidation of long positions by FIIs in index futures. As of Monday, foreign institutional investors had closed out 82,987 long index futures contracts that were still open as of Friday.
According to Andrew Holland, CEO of Avendus Capital Public Market Alternate Strategies, “The recent optimism surrounding China’s stimulus package has prompted significant cash selling by FIIs. Additionally, there’s mounting concern that potential conflict between Israel and Iran could lead to soaring oil prices, resulting in the Reserve Bank of India becoming more hawkish in response to rising inflation expectations.”
Furthermore, with the Chinese market reopening on Tuesday (October 8) after a week-long holiday and the Reserve Bank of India set to conduct its bi-monthly Monetary Policy Committee meeting from October 7 to October 9, market participants are bracing for potential ramifications.
“Especially with the market conditions in flux, there may be some redeployment of capital from India to China,” added Holland, highlighting a trend that could affect market dynamics in the coming days.
On Monday, the atmosphere on the trading floor was tense, with the fear gauge, known as India Vix, rising by nearly 7% to reach 15.08. Major contributors to the decline in Nifty included HDFC Bank Ltd and Reliance Industries Ltd, which saw significant drops in their share prices.
A Significant Loss: ₹25 Trillion
The ongoing downturn in the Indian stock market has led to a staggering loss of ₹25 trillion in investor wealth over the past six days. This decline follows the Nifty reaching a record high of 26,277.35 on September 27.
In addition to the cash selling, FIIs completely liquidated their long positions in index futures on Monday and initiated short positions for approximately 34,724 contracts.
“FIIs previously held their second-highest long index futures positions of 359,805 contracts on September 23, which they drastically reduced to 82,987 contracts by Friday. The complete closure of these long positions on Monday amplified the market slump, despite the absorption of their cash selling by DIIs,” explained Rohit Srivastava, founder of IndiaCharts.
Following Monday’s downturn, all major stock indices have retracted, declining over 5% from their respective highs. A pullback signifies a 5-10% decline from the peak, whereas a decrease ranging from 10% to 20% is categorized as a correction, and any drop exceeding that is termed a bear market.
As it stands, the Nifty concluded Monday’s trading at 24,795.75, marking a 5.64% decline from its record high of 26,277.35 reached on September 27. The Nifty Midcap 150 index has decreased by 5.56% from its peak, while the Nifty Smallcap 250 has witnessed a 6.28% drop from its all-time high. Notably, the midcap index achieved a record high of 22,515.4 on September 25, and the smallcap index peaked at 18,688.30 on September 24.
