Indian shares slid sharply on Monday - its fifth consecutive day of decline - as crude oil prices fell further on growing concerns over a slowdown in Chinese economic growth.
The Sensex index closed the day down 0.44 percent at 24,825.04 points while the Nifty closed down 0.49 percent at 7,563.85 points. But nervousness persists, considering that the two indices had tumbled to their 52-week lows in early trade when the Sensex touched 24,598.9 points and Nifty 7,496 points, before short covering pulled up the markets up briefly.
With commodity and oil prices continuing to soften, global markets could continue to be under pressure, analysts and fund managers said.
“The journey around the Chinese economy is just beginning,” said Saurabh Mukherjea, CEO (Institutional equities) at Ambit Capital. Since March 2015, Ambit has been advising clients to be “very careful” about investing in India, as it expects real estate and stock valuations to correct further.
“Risk asset prices had been distorted by the tightening of monetary policy in the United States and the economic slowdown in China. They will remain weighed down and have a long way to go before things start to improve,” Mukherjea said.
On Monday, global crude oil prices continued to extend its fall below $35 to a fresh 11-year low and metal prices have also weakened.
Gopal Agrawal, chief investment officer at Mirae Asset Global Investments (India) Ltd, said that globally, with commodity prices in turmoil, manufacturing activity across various markets could remain under pressure, which, in turn, will impact GDP, earnings growth and job creation.
But Agrawal believes the current volatile scenario could be neutral for India, where inflation is low and a scenario for benign interest rates starting to emerge.
India’s Sensex has fallen 5 percent in the New Year already, with steel, engineering and banking stocks being the hardest hit.
Taher Badshah, senior vice president and fund manager at Motilal Oswal AMC, however, believed that domestic-led growth was starting to emerge in India in the areas of consumer retail, road and construction activity. Agrawal also agreed, stating that urban consumption and government-led planned expenditure was on the rise.
India’s Reserve Bank of India has pegged the country’s GDP at 7.4 percent for the fiscal year ending March 2016, which is similar to what several brokerage and equity research firms forecast for the same period.