A massive flight of foreign capital along with prospects of a global conflict in Europe heavily battered Indian equities on Monday. Besides, high oil prices, upcoming budget and lackluster quarterly results added to the volatility in the market.
Though triggered on different counts, some analysts compared the day's fall to the 'Black Monday' crash in the US that took place in 1987. As per data, FIIs sold Rs 3,751.58 crore on BSE, NSE and MSEI in the capital market segment.
FIIs had sold equities worth more than Rs 15,000 crore in January until last Friday. Lately, a FIIs sell-off has been brought upon by a possible US Fed rate hike to contain inflation. Notably, a rate hike by the US Federal Reserve can potentially drive away more FII money from India and other emerging markets.
Other global markets such as Asian shares slipped on Monday as investors braced for a Federal Reserve meeting at which it is expected to confirm it will soon start draining the massive lake of liquidity that has supercharged growth stocks in recent years.
Similarly, European stock markets started the week in the red as worries about a possible Russian attack on Ukraine dented sentiment and investors braced for the US Fed's meeting this week.
On the domestic front, the volumes on the NSE were higher than the recent average. Sector wise, all indices ended in the red with Realty, Metals and Consumer Durables leading the downfall whereas bank index fell the least. India's volatility index, (India VIX) rose by 21 percent at 22.8 levels ahead of key events as well as monthly FNO expiry this week.
Consequently, the S&P BSE Sensex settled 2.62 percent or 1,545.67 points down at 57,491.51 points, whereas NSE Nifty50 ended at 2.66 percent or 468.05 points down at 17,149.10 points.
"Nifty came under intense selling pressure on January 24 due to fund outflows from FPIs ahead of the monetary withdrawal by global Central Banks and rate hikes, rising crude oil prices whose outlook has worsened following the Russia-Ukraine standoff and the forthcoming Union Budget followed by the state election outcome," said Deepak Jasani, Head of Retail Research, HDFC Securities.
"Though the Nifty has not closed at the intraday low, not many would attempt to do aggressive bottom fishing on Tuesday ahead of the holiday on January 26 and the US Fed meet outcome."
According to Siddhartha Khemka, Head - Retail Research, Motilal Oswal Financial Services: "All the gains of January has now been wiped out, with Nifty down 2.7 percent from January 1, 2022. Global cues and the upcoming Union budget would be the key factors driving the market direction in the near term. On the political front, developments in the upcoming assembly polls which will be held between February 10 to March 7 in five states would also be closely monitored."
"After correction of more than 7 percent from its recent peak, Nifty may now find some support near to the psychological level of 17,000. Some of the heavyweight stocks have corrected around 8-10 percent and offer better entry opportunity for long-term investors."
In addition, Vinod Nair, Head of Research at Geojit Financial Services, said: "While all sectors hit rough weather, stocks of the new-age tech companies were the most affected due to drop in growth of profitability amid expensive valuations."