Benchmark indices fell on Thursday as initial euphoria around Donald Trump’s victory in the US presidential elections fizzled out and caution settled in ahead of the US Federal Reserve’s policy decision as well as China’s stimulus package announcement.
The Sensex slid 1% to 79,541.79 points and the Nifty ended 1.2% lower at 24,199.35 points. With this, the indices erased almost entire gains seen on Wednesday post Trump’s victory.
Foreign portfolio investors (FPIs) continued to be sellers as a strong dollar under Trump regime is unlikely to bode well for the emerging market equities. Foreign investors pulled out Rs 4,889 crore worth of shares on Thursday, while domestic institutional investors (DIIs) pumped in Rs 1,787 crore into the market. FPIs have now sold shares in India for 25 of the last 26 trading sessions.
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“A strong dollar index is a negative for emerging markets. India getting shielded from that macro headwind is a far possibility. The US doing well is likely to be anti-EM,” according to Angel One Wealth.
Jitendra Gohil, chief investment strategist at Kotak Alternate Managers, said, “It will be premature to comment with certainty how the interrelation between global politics, economics and financial market performance will evolve (under Trump) …. We have been recommending investors to stay invested and rotate their portfolio towards defensive and large-cap stocks.”
Apart from tactical China shift and US presidential elections, the weakening earnings and economic growth momentum has also been key reasons for FPIs to sell in India amid high valuations.
Gohil believes the FPI sell-off may hit fatigue, and as the government starts to step up spending efforts, the economic momentum may pick up in the coming months.
With uncertainty regarding the US elections behind, investors are now waiting for the Fed’s interest rate announcement, which would dictate market direction on Friday.
“Investors remained on the sidelines ahead of the Fed rate decision, where a 25 bps rate cut is anticipated, with close watch on chairman Jerome Powell’s remarks for future direction,” said Siddhartha Khemka, head of research, wealth management at Motilal Oswal Financial Services.
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All the sectoral indices on Thursday ended in the red,
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