Investors lose Rs 6.5 lakh crore in two days as Fed rate hikes concerns weigh on markets

Buzzing Stocks, Slideshow

Stock indices tumbled on Monday, August 22, wiping out Rs 6.5 lakh crore of investors' wealth in just two consecutive losing sessions.

The Nifty50 fell more 268 points, or over 1.5 percent, to 17,491 and the BSE Sensex declined 872 points to 58,774 at close.

The retreat took the Sensex’s loss to nearly 1,700 points in two sessions despite consistent buying by foreign institutional investors (FIIs).

Dalal Street seems to be worried after some US Federal Reserve officials spoke about more rate hikes in coming policy meetings to bring inflation near the targeted 2 percent.

The chances of another 75 basis point interest rate hike in the Fed’s September meeting may be increasing, with all eyes trained on a speech by Fed Chair Jerome Powell at an economic symposium scheduled for August 25-27 in Jackson Hole, experts said. One basis point is one-hundredth of a percentage point.

The US dollar index already climbed over the 108.4 level on Monday, up from 105.09 on August 11.

Global counterparts also corrected with Germany's DAX and France's CAC falling more than 1.5 percent. Britain's FTSE was down more than half a percent. Asian markets were mostly in the red with South Korea's Kospi and Australia's ASX 200 declining around 1 percent each, and Japan's Nikkei and Hong Kong's Hang Seng dropping half a percent each. China's Shanghai Composite gained half a percent after China's central bank cut benchmark lending rates.

The broader markets were also caught in a bear trap for yet another session, with the BSE Midcap and Smallcap indices declining 1.8 percent and 1.2 percent respectively.

Also read:  Despite correction, these small-cap IT stocks remain MF favourites

Among sectors, BSE Bank, Finance, Healthcare, Industrials, IT, Auto, Capital Goods, Metal and Realty indices were down between 1 percent and 2.7 percent.

Investors' Wealth

Investors lost around Rs 6.5 lakh crore of wealth in two consecutive sessions; the market capitalisation of BSE-listed firms dropped from the record Rs 280.52 lakh crore last Thursday to Rs 274.02 lakh crore on Monday.

The wealth erosion may be on expected lines. Just before the latest correction, investors' wealth had increased by more than Rs 45.6 lakh crore in two months.

Benchmark indices had rallied more than 18 percent with the participation of all sectors in the two months, which made Indian market valuation more expensive against emerging peers.

Also read: Valuations in focus as Indian stocks become twice as expensive as EM peers

"With such a sharp upmove, currently, the Indian market has definitely entered the overbought zone on the daily time frame with RSI touching 84 levels recently. Hence one should be very cautious for the short term as one can expect a small dip in the markets," said Sandeep Bhardwaj, CEO of Retail Broking at IIFL Securities.

RSI is short for Relative Strength Index, a momentum indicator used in technical analysis.

The correction should be looked at as an opportunity to buy quality stocks for the long term, Bhardwaj said.

FIIs have been net buyers in August after selling in the previous 10 consecutive. They have bought a net of nearly Rs 18,000 crore worth of shares during the current month. This is just about 5 percent of what they had sold in the previous 10 months.

"India is likely to be the fastest growing economy in FY23 with almost zero chances of recession. Hence, FIIs are putting money in India considering it is a much safer bet currently compared to other markets," Bhardwaj said.

Stocks at 52-week high

But the count of stocks at their 52-week highs was more than the number of stocks at 52-week lows and even the the list of stocks in their upper circuit was higher than the ones in their lower circuit.

BSE data indicated that 146 shares hit 52-week highs on Monday against 46 shares at 52-week lows.

Also read: Markets on a downhill drive: Key factors behind the slump

Adani Power, Astra Microwave, Forbes & Company, Grindwell Norton, ITC, KSB Phoenix Mills, Pricol, Torrent Power, West Coast Paper and Titagarh Wagons were among 135 stocks that touched 52-week highs.

A total of 290 stocks hit their upper circuit, against 246 stocks touching their lower circuit on Monday.

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