MUMBAI: Mumbai stocks fell on Wednesday as investors hit the pause button ahead of the first phase of India’s mammoth sevenstage elections with polling in 91 seats on Thursday. The International Monetary Fund’s decision to cut outlook for global and Indian growth also weighed on Street’s sentiment. Experts said stocks could struggle to hold onto gains after a sharp pre-vote rally in the past few weeks.
The Sensex slipped 353.8 points, or 0.9 per cent, to close at 38,585.3 and the Nifty ended down 87.6 points, or 0.75 per cent, at 11,584.3. Decliners outnumbered the advances on the Nifty with 29 of the 50 constituents ending in the red. Stock indices in Asia were mixed as concerns emerged over the global growth outlook.
The Sensex has gained 9.3 per cent from the calendar year 2019 low of 35,287.1 on February 19, while the Nifty has climbed 9.4 per cent on the back of opinion polls indicating the BJP-led coalition returning to power on May 23.
The national polls will be held between Thursday and May 19.
Index heavyweight HDFC Bank was one of the biggest laggards. The stock fell 2 per cent after a block deal where private equity giant KKR sold a portion of its stake. Bharti Airtel, Asian Paints, Tata Consultancy Services and Housing Development Finance Corporation also fell 2 per cent to 3 per cent. Tata Motors was the top gainer on the Sensex climbing 4.7 per cent. Hindustan Unilever, Kotak Mahindra Bank, Bajaj Auto and Coal India all rose 0.5-0.8 per cent.
“Fatigue is setting in. Market has more or less factored in the possibility of the NDA returning to power,” said Piyush Garg, Chief Investment Officer at ICICI Securities. Garg added that it could be difficult for the index to rally from current levels. Yogesh Mehta, vice president-retail research at Motilal Oswal Securities, believes that lack of participation from retail investors is making high net-worth investors cautious.
“Mid-caps are not participating and large-cap valuations look stretched for the near term,” said Mehta.
The volatility index, India VIX, also known as the fear gauge, is also pointing towards caution as it is firmly trading above 20 level. India VIX ended up 4 per cent at 21.09 level and analysts expect it to touch 22-23 in the near term.
Oil prices hovering above $70 per barrel is also a near-term headwind for domestic equities, experts said.
Kotak Institutional Equities believes stocks are “getting a bit hot for comfort”.
“The Indian market has largely ignored the recent (1) economic growth deceleration, (2) rebound in crude prices and (3) deterioration in India’s fiscal position,” the brokerage said. “Valuations are largely unattractive for most parts of the market and we note potential downside risks to earnings in the event of a further slowdown in the economy,” it added.