On Friday, it rained blood on Dalal Street. Foreign Institutional Investors (FIIs), which are the major drivers of the Indian market, sold equities worth a net Rs 1,475 crore, according to the provisional data available on the National Stock Exchange (NSE) website. However, there was no need to press the panic button, said analysts.
"We are positive on the market as long as the Nifty holds above the crucial level of 4,250, breaching which, the weakness may prolong."
"The market was overdue for a correction and global cues have triggered it. It is actually a good opportunity for investors to enter," said Manish Sonthalia, vice-president (equity strategy), Motilal Oswal Securities.
The wider 50-share Nifty of the NSE shed 3.78 per cent, or 174.6 points, to close the day at 4445.20, while the benchmark Sensex of the Bombay Stock Exchange plummeted by 616.63 points intra-day to mark the third biggest intra-day fall in absolute terms.
"If the Sensex holds above 15,150, it will be a safe market to stay invested in. At large, the buyer must stay invested in the market despite the correction. Going forward, investors could generate good returns over the next 3-6 months. This is a buyers' market," said Pankaj Pandey, chief manager, ICICI Direct.
The fall was in line with a weakness across global markets.
Equities across the world fell as weak US housing data (a reflection of economic slowdown) and a widening gap between credit default swaps and bond yields (indicating a lower risk appetite and credit worthiness) in the country saw investors turning to less risky asset classes.
While the US housing market deteriorated further in June as new home sales fell 6.6 per cent, reports said speculative investors were being forced to sell riskier assets as banks tightened lending standards in the face of deteriorating credit markets.
"The sub-prime mortgage and associated credit risks in the US have triggered a correction in global markets. This is not just a country-specific phenomenon. It is better to wait and watch as this is the last trading session of the week," said Prakash Kacholia, managing director of Emkay Shares.