In global markets, Asian stocks declined, led by China, and the yuan fell as investors assessed the latest move by the People's Bank of China to loosen monetary policy. The US stocks dropped for a second straight day on Friday, weighed down by another rise in Treasury yields in the wake of a solid jobs report that capped off a week of robust data.
Back home, India share markets opened lower today. The BSE Sensex is trading down by 297 points while the NSE Nifty is trading down by 81 points. The BSE Mid Cap index opened down by 0.7% while BSE Small Cap index opened the day down by 1%.
Barring oil & gas stocks and PSU stocks, all sectoral indices have opened the day in red with metal stocks and realty stocks witnessing maximum selling pressure.
The rupee is trading at Rs 73.85 against the US$.
Foreign investors have pulled out over Rs 93 billion (US$ 1.3 billion) from the Indian capital markets in the last four trading sessions on relentless fall in rupee and rise in crude oil price.
The latest withdrawal comes following a net outflow of over Rs 210 billion from the capital markets (both equity and debt) last month. Prior to that, they had put in a net amount of Rs 74 billion in July-August.
According to the reports, foreign portfolio investors (FPIs) withdrew a net sum of Rs 70.9 billion from equities during October 1-5, and Rs 22.6 billion from the debt market, taking the total to Rs 93.6 billion (US$ 1.3 billion).
FPIs have been net sellers almost throughout this calendar year except a couple of months. However, the swiftness of the exit in October thus far has shaken the market.
Notably, the BSE Sensex plunged 792 points to end at a near six-month low of 34,377, while the broader NSE Nifty dropped 283 points to 10,316 on Friday. This was the fifth straight weekly loss for the benchmark indices. The Sensex declined by a massive 1,850 points or 5.1%, and the Nifty lost 614 points or 5.50%, during the week.
The RBI maintained status quo on the benchmark interest rate in the monetary policy on Friday but warned that rising oil prices and tightening of global financial conditions pose substantial risks to growth and inflation.
The central bank changed its policy stance to 'calibrated tightening' from 'neutral', while affirming its commitment to achieve the medium-term objectives to contain price rise. The markets were expecting the RBI to go for 25-50 basis points hike in Repo rate. The rupee touched a low of 74 on Friday in the wake of the RBI decision and FPI withdrawals.
The RBI has now has proposed a Voluntary Retention Route (VRR) to encourage foreign portfolio investors willing to undertake long-term investments in debt.
Under the proposed route, FPIs will have more operational flexibility in terms of instrument choices as well as exemptions from regulatory provisions such as the cap on short-term investments at 20% of portfolio size, concentration limits and caps on exposure to a corporate group.
While there is a legitimate fear about the bleak macro environment along with the liquidity in the NBFC space, we, at Equitymaster believe this fear is being extended too far... to some very strong business.
The chart below shows the current mood of the market. Headline indices have corrected significantly from their peaks in 2018.
Are These Deep Corrections a Buying Signal?
These corrections are a clear sign of fear across sectors and individual stocks.
So, what should you do in such times? How is all of this going to impact you and your portfolio? Amid uncertainty, panic and despair, Tanushree Banerjee, Co-head of Research is finding safe stocks. In our latest edition of the stock market podcast, she talks about such stocks. Listen in... visit SoundCloud, iTunes or Stitcher.
Moving on to the news from the IPO space. Housing finance company Aavas Financiers, which raised Rs 17.34 billion through an initial public offering recently, will list its shares on the exchanges today. The IPO, which opened from September 25-27, was subscribed 97% at a price band of Rs 818 to Rs 821 per share.
The IPO comprised fresh issue of up to Rs 4 billion and an offer for sale of up to 16.2 million equity shares, including anchor portion of 63,36,439 equity shares.
Aavas Financiers offers housing loans to customers from low and middle-income segments in semi-urban and rural areas.
Notably, Indian companies raised Rs 124.7 billion through initial public offerings in April-September this fiscal, a plunge of 53% from the year-ago period, mainly due to volatile equity markets and uncertainties in macro environment.
According to the reports, 10 companies garnered Rs 124.7 billion through their respective IPOs in April-September of the current fiscal, much lower than a record Rs 267.2 billion raised by 19 firms in the year-ago period.
In the first half of 2016-17, 15 companies had raked in Rs 165.4 billion through the route.
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