Stocks in bear market as Sensex crashes 807 points, Nifty below 7,000

Mumbai: Indian stocks entered bear market territory on Thursday with the benchmark equity index Sensex falling over 800 points. The biggest market decline in more than six months to close at fresh 21-month lows followed a steep slide in European shares, sliding crude oil prices and disappointing corporate earnings on the domestic front.

The market is seen falling further in the days ahead, as risk is off the table globally.

European shares were trading sharply lower, led by weakness in banks and miners. Britain’s FTSE was down 2.9%, Germany’s DAX traded 3.4% lower, while France’s CAC was down 4%.

BSE’s 30-share Sensex closed 3.4%, or 807.07 points, lower at 22,951.83 points, its lowest close since 8 May 2014. Earlier in the day, it had dropped as much as 3.6% or 849.78 points to 22909.12, the level last seen on 9 May 2014.

On 29 January, 2015, Sensex closed at an all-time high of 29,681.77 points and since then, it has fallen 22.67%.

The market breadth was extremely negative, with more than seven shares declining for every share that advanced.

National Stock Exchange’s 50-share Nifty also slipped below the 7,000-mark and closed 3.32%, or 239.35 points, lower at 6,976.35 points, its lowest close since 9 May 2014.

Both indices posted their steepest intra-day fall since 24 August.

“There is no relief in sight,” said Dipen Shah, senior vice-president and head of private client group Research at Kotak Securities Ltd.

“The concerns on the global front are intensifying. Crude oil also came off sharply. On the domestic front, the results over the few days, those of PSU banks in particular, have disheartened investors,” Shah added.

All sectoral indices closed in the negative. BSE Realty index and BSE Utilities index shed the most, declining 5.94% and 4.89%, respectively.

Around 28 of 30 Sensex stocks closed in the red. Adani Ports and Special Economic Zone Ltd and Bharat Heavy Electricals Ltd were the top losers, falling 6.94% and 6.01%, respectively.

Oil prices slid on Thursday, dented by record US crude inventories at the Cushing delivery point, worries about the demand outlook, and as Goldman Sachs said prices would remain low and volatile until the second half of the year.

Brent crude futures were down 31 cents at $30.53 per barrel at 0850 GMT.Adding fuel to fire was top lender State Bank of India’s (SBI’s) quarterly earnings, as it reported dismal profits, mirroring the damage seen in the other state-run lenders’ profits, which were badly impacted by higher provisioning for bad assets.

SBI reported a 62% decline in net profit in the December quarter, because of a jump in provisions and bad loans.

Foreign institutional investors or FIIs have pulled out a net of $1.89 billion from Indian shares since the start of the year. A lot of passive money seems to be flowing out, dealers said.

In a note on Wednesday, Kotak Institutional Equities, the arm of Kotak Securities said that active and passive funds equally contributed to the outflows from India and Interestingly, India-dedicated outflows superseded emerging market peers during the period.

Active emerging market funds continued to see redemptions taking their three-month tally to $6.6 billion, Kotak Institutional Equities said in the note.

“There is no sign of a respite from the freefall. Implied volatilities are around 25% levels, which were at 14-15% last week,” said Ravi Sharma, manager (institutional equity derivatives), Prabhudas Lilladher Pvt. Ltd.

Implied volatility is the markets’ expectation of volatility in an underlying stock or index price from the start of an option to its expiry. This is a factor of how liquid the particular option is (in terms of trading volume) and also how the market is expecting the price of the underlying asset to move.

Sharma pointed that put-call ratio was at 0.85, indicating there is room for market to go down further.

“FIIs are buying out of the money puts, in an attempt to seek protection from further decline in the market. They are also selling stock futures aggressively. All this indicates they are bearish on the market,” said Sharma.

“We thought 7,000 Nifty could be a support level, but that has been breached as well,” added Sharma.