Indices drop 2% in 5 days – Market News

Benchmark indices extended their losing run to the fifth session on Thursday and erased all the gains seen this month as caution has taken centre-stage ahead of the D-Day next week when the outcome of the ongoing Lok Sabha elections is set to be decide.

Investors will keenly watch the exit polls post the completion of final phase of voting on June 1 as it will set the mood for the next week. The counting of votes is scheduled on June 4.

On Thursday, Sensex slid 617.3 points or 0.8% to close at 73,885.60 points and the Nifty 50 fell 216.05 points or 1% to 22,488.65 points. With this, the benchmark indices have dropped over 2% in the last five sessions. Meanwhile, volatility gauge India VIX ended flat at 24.18 levels on Thursday, continuing to hover around its highest level in two years.

Foreign institutional investors (FIIs) remained sellers, while domestic institutional investors (DIIs) provided cushion. According to the provisional data, FIIs net sold Rs 3,050.15 crores of shares on Thursday and DIIs net bought Rs 3,432.92 crores of shares.

After Thursday’s losses, Sensex is down 0.8% for May and the Nifty 50 is down 0.5% for the month. Experts do not anticipate any major trend reversal on Friday as caution is likely to persist on the last trading session ahead of the exit polls. This would mean May will be the first month of negative returns for the benchmark indices in four months.

The expiry of May monthly derivatives contracts also fuelled some volatility on Thursday. Shrikant Chouhan, executive vice president and head of equity research at Kotak Securities, highlighted that the Nifty 50 had started the May series around 22,500 points level and has closed near the same levels despite the volatile moves throughout the month.

“For the June monthly series, we are of the view that if there is further correction, one should be a buyer in this market. We are expecting market to move towards 23,700/23,800 points level,” Chouhan said.

Deepak Jasani, head of retail research at HDFC Securities also shared a similar view. “Investors who are not overinvested in equities need not do anything (apart from some review/rebalancing) with their portfolio as this sell-off may seem minor in the big picture sometime later,” he said.

Jasani said that once the expected party/alliance gets sworn in and rolls out a series of policy announcements in the first 100 days, investors could return to the Indian markets.

Market participants will particularly watch for the reaction of FIIs, who have been sellers in the market in the past couple of months, to the election results.

Chouhan said that if election results are in line with expectations, the market will definitely celebrate it. While the market is anticipating the incumbent government to return to power for the third term, investors will closely watch the strength of the government’s majority as it is seen as one of the key determinants for policy continuity.