Sensex and Nifty decline sharply, future uncertain ahead.
The BSE Sensex dropped about 1,600 points from the day’s high, while the NSE Nifty looked poised to test the sub- 25,000 level in brisk selling. On Friday afternoon, amid fears that Israel was planning a significant retaliation following Iran’s missile attacks, the scope of the Middle East war is widening. There are fears that foreign investors are abandoning investments in the Indian stock market to invest in the bartered Chinese mainland market. Given its reasonable valuations and improved earnings outlook following the stimulus measures announced by Chinese authorities. In contrast, Indian valuations are considered rich. Currently, Nifty is trading at 21.5 times its one-year forward earnings, which is above its historical average of 20.4 times. As a next step, the Chinese government is working on a fiscal stimulus, the details of which could be released later in the month. Media reports indicate that the government could directly target measures to revive the weak links of the economy-private consumption and the property sector. From the day’s high of 83,368.32, the BSE Sensex plunged 1,611.47 points to hit a low of 81,756.85, extending its recent fall to the fifth straight session. Nifty was trading at its day’s low of 25,002.60, the recent selling in the market is more related to Foreign Portfolio Investors (FPI) selling than to fears of escalating tensions in the Middle East. In the last three days, there has been a massive selling of Rs 30,614 crores by FII in the cash market. Due to large-cap shares, the valuations of mid-cap and small cap indices are at premium of 59 percent and 12 percent compared to the Nifty-50, respectively.
