Equity markets suffer prolonged weekly decline in five years due to trade concerns and profit reservations
India's major equity benchmarks, the Nifty 50 and the BSE Sensex, experienced a six-week losing streak from July to August 2022. This downturn was primarily attributed to sustained foreign institutional investor (FII) sell-offs, disappointing corporate earnings, and global trade uncertainties, particularly the stalled trade negotiations between India and the US.
Key contributing factors to this downward trend included significant foreign fund outflows, weak corporate earnings, US-India trade tensions, and global economic and geopolitical concerns. The selling by FIIs created downward pressure on the markets, while disappointing quarterly results from companies like Nestle India lowered investor confidence.
The US, under President Donald Trump, paused advancing trade discussions and imposed tariffs on Indian goods, leading to trade uncertainties that negatively affected markets. Ongoing instability and market volatility across Asia and global markets contributed to cautious investor behavior and profit-taking.
The market indices fell to multi-month lows during this period, with the Sensex and Nifty dropping below key psychological levels. This reflected widespread market pessimism, marking this the longest losing streak since April 2020.
On a daily basis, LIC gained 3.2% due to a rise in quarterly profit. However, the Nifty 50 and the BSE Sensex dropped 0.95% each. The small-cap and mid-cap indexes also declined, with losses of 1.4% and 1.1%, respectively.
Notable declines were seen in sectors such as finance and energy, which fell 1.2% and 1.4%, respectively. Bharti Airtel dropped 3.3% on multiple block deals at a discount, while the US President, Donald Trump, ruled out further talks until the tariff dispute is resolved.
In contrast, Hero MotoCorp had a week-long surge of 6.7%, topping the Nifty 50, following a surprise earnings beat and stronger exports.
The Reserve Bank of India (RBI) held interest rates steady on Wednesday but expressed concerns about tariff-related risks to the economy. Sandeep Bagla, CEO of TRUST Mutual Fund, stated that "markets are also adjusting to the RBI's message that the economy should not expect too much incremental support from monetary policy measures for now."
For the week, the Nifty 50 and the BSE Sensex shed 0.8% and 0.9%, respectively. Textile exporters such as KPR Mill, Gokaldas Exports, Vardhman Textiles, and Trident also experienced a decline of 4.2%-12.1% due to the US increasing duties on Indian imports. The IT and pharma indexes lost 0.7% and 2.8%, respectively, in this challenging market environment.
- The prolonged losing streak of India's major equity benchmarks was influenced by factors such as significant foreign fund outflows, disappointing corporate earnings, US-India trade tensions, and global economic and geopolitical concerns, which led to selling by foreign institutional investors (FIIs) and a decline in investor confidence.
- In the realm of personal-finance, the ongoing market volatility across India and general-news of tariff disputes and trade uncertainties between India and the US may affect the investment strategies of individuals, suggesting caution and careful decision-making.
- Technology continues to play a role in the investment world, as shown by how the selling by FIIs created downward pressure on the markets through digital transactions, and on the flip side, companies like Hero MotoCorp boosted their stock prices through strong digital export performance.
