Markets decline on heavy FPI selling; Sensex slips below 60,000

FPIs sold shares worth Rs 2,902 cr, according to provisional data from exchanges

The Indian equity benchmarks fell on Friday because of heavy selling by foreign portfolio investors (FPIs) amid worries over US non-farm payroll data, which is tracked by investors to gauge the path of the US Federal Reserve’s monetary tightening.

The Sensex declined 453 points, or 0.7 per cent, to end the session at 59,900, while the Nifty settled at 17,859 after dropping 133 points. This was the third consecutive session of decline for the benchmark indices. Both the indices are now in the red for this year, after giving up the gains of the first two sessions. The Sensex and the Nifty are down 1.5 per cent and 1.2 per cent, respectively, in 2023.  

FPIs on Friday sold shares worth Rs 2,902 crore, according to provisional data from the exchanges. Domestic institutional investors, on the other hand, were net buyers to the tune of Rs 1,083 crore. 

Investors were already worried after the US private payrolls figures released on Thursday surpassed estimates. The US labor department’s employment report, released after Indian market hours on Friday, showed that the economy had maintained a strong pace of job growth in December, with the unemployment rate falling to 3.5 per cent, but higher borrowing costs could see the labor market momentum slowing by mid-year. The Dow Jones Industrial Average and the S&P 500 Index were trading more than 1.6 per cent higher in early trade on Friday.

Analysts said the private payroll data suggested a robust jobs market in the US and strengthened the case for the US central bank to keep raising rates.

Federal Reserve Bank of Atlanta President Raphael Bostic this week said there was still much work to do despite moderating price pressures. Bostic added that inflation was way too high and remained the biggest headwind in the US. Bostic is the latest among Fed officials who made hawkish comments this week. Minneapolis Fed President Neel Kashkari said he expected rates to rise up to 5.4 per cent, and Kansas City Fed’s Esther George favoured a rise above 5 per cent.

The US central bank’s views on inflation are at loggerheads with that of markets, which are more optimistic after price pressures moderated.

Crude oil prices declined amid demand concerns. Brent crude was trading at $ 77.1 a barrel, a weekly decline of 9.3 per cent. Some experts felt that cooling crude prices along with economic distress could be positive for Indian equities.

“What is spooking people is the fact that the world is heading into an economic slowdown in the western world, specifically in the US. It’s not obvious that there is massive relief on the inflation side. There is some degree of relief with crude coming down. But it is not enough to deal with investor jitteriness, given the imminence of the recession in the western world. But I believe that the imminent recession in the west plus commodity prices cooling off is a recipe for a bull market in India, given the robustness of the Indian economy,” said Saurabh Mukherjea, founder and chief investment officer of Marcellus Investment Managers.

Going forward, investors will be tracking the quarterly results of Indian companies for further cues.

“If results surprise on the upside, the market is bound to take courage from that,” said Mukherjea.

The market breadth was weak with 2,178 stocks declining against 1,330 advances on the BSE.

“In addition to macro factors, the focus of equity markets over the next few weeks will also be corporate earnings,” said Shrikant Chouhan, head of equity research (retail) at Kotak Securities.