Indian stocks opened the fresh week on a downbeat note on Monday, picking up from the biggest weekly plunge in two years recorded last week. The spectacular crash that wiped out billions in investor wealth has already led to Indian markets losing the tag of Asia's best performing market.
The rupee's decline and fall to become Asia's worst performing currency, the spiraling oil prices, liquidity fears in the market stemming from the IL&FS fiasco -- all have played a part in the massive correction in Indian markets.
On Monday, the benchmark index Sensex lost nearly 300 points, while the Nifty looked like it was on a losing battle to hold above 10,000 level. The BSE Sensex opened at 34,412 and the Nifty50 at 10,310 on Monday, after receiving severe battering last week, with Sensex losing 792 point on Friday alone.
While Sensex blue chips such as Reliance Industries, HDFC and ITC led the losses on BSE, as many as 37 stocks in the Nifty50 marked declines even as NSE data showed foreign portfolio investors and domestic institutional investors remained net sellers through the last week.
What's the outlook at this point?
The rise and rise of Sensex has all but snapped for all you know. The Indian markets used to be Asia's crown until a month ago, but the scene has changed altogether with a combination of factors joining hands. Worsening the rupee-crude-liquidity complex, the upcoming elections in five states have also put investors on the cautions mode.
"The way things have panned out on both domestic and global front, we do not see any chance of overnight reversal," Jayant Manglik, president of Religare Broking Ltd, told Business Standard. The sentiment is bearish and traders should continue with 'sell on rise' approach, the analyst has advised.
Some analysts are even more skeptical, suggesting that the Sensex may drop below the psychological 30,000 levels before the turbulent year runs out. "The Indian market will continue to see heightened volatility in the current quarter because of a host of expected negative factors, with the Sensex likely to come down to 30,000 level by the year end," Kedia Stock and Commodity Research MD Vijay Kedia told Arabian Business.
The Election Commission said on Saturday that results of the assembly elections in five states -- Madhya Pradesh, Rajasthan, Chhattisgarh, Telangana and Mizoram - will be announced on December 11. The results will give vital clues to the prospects of the BJP in the next Lok Sabha elections. A loss or victory on less than expected scale will be make the markets jittery again.
With sentiment roiling further, more capital is fleeing the markets. The foreign investors have withdrawn over Rs 9,300 crore form the Indian capital markets in the last four trading sessions according to the latest data. This is over and above the net outflow of Rs 21,000 crore in the month of September.
Another worrying sign for the market is the loss of steam in the mutual funds. This asset class has been red hot over the last couple of years, driving the markets to dizzying heights. However, the latest numbers show that the Indian investors' newly-found blind trust in mutual funds is ebbing away as well, albeit temporarily.