Nifty Slump Not A Cause For Concern, Say Market Experts, Cite Global Headwinds

The stock market witnessed a selloff on Monday, with NSE Nifty 50 and BSE Sensex closing at their lowest levels in over a month. According to analysts, the fall in the frontline indices is not a cause for worry as this is not a correction when one looks at the wider market.

From their respective 52-week highs, the Nifty is down 8-9%, but the NSE Smallcap Index is hardly down by 6%, said Mihir Vora, chief investment officer of Trust Mutual Fund. According to him, "we are obsessed" with Nifty but it is no longer a representation on the domestic economy.

In addition, the fall on Monday also seems sharp as it is compared with the climb seen during the special Diwali Muhurat trading session held on Friday.

"The ferocity (of the fall) is only because we have looked at it from the muhurat trading prices, which were abnormally high...If you count from the day before, then the stocks are down (by) less than a percent," Deepak Shenoy, founder and chief executive officer at Capitalmind, told NDTV Profit.

Shenoy also added that part of the fall is driven by geopolitical uncertainty, selling by foreign portfolio investors and due to poor earnings. After the US elections, when certainty comes into play, the markets will get more stable, he said.

Mihir Vora also saw global factors as the cause for the market's decline. The economic slowdown in China, which is the biggest consumer of commodities, has led to the weakening of prices. This has put pressure on the earnings of the Nifty 50 companies, he said.

"If you analyse why they (earnings estimates) are cut, you will realise lot of these are cut due to global reasons," Vora added.

Despite the global factors in play, both the experts are of the view that there is no cause for worry.

However, Prateek Agrawal, managing director and CEO at Motilal Oswal Asset Management Co., said the sharp downtick in the domestic market "was not expected".

One of the technical factors behind the slump is the reduced interest in arbitrage funds, which has lowered the market's ability to keep absorbing large blocks, he said.

Notably, the Nifty 50 slumped 309 points, or 1.27%, to close at 23,995.35, whereas the Sensex fell 941.88 points, or 1.18%, to end at 78,782.24.