The Nifty 50 declined for a seventh straight week to close at 23,140.5 on Friday, its longest losing run since the Covid-19 crash of February-April 2020, when the index also fell for seven consecutive weeks amid the pandemic-driven global sell-off.
The Nifty closed on Friday at 23,140.50, down 205.90 points from 23,346.40 a week earlier. It had climbed to 23,414.30 on Monday, when Brent fell 3.4 per cent, before surrendering those gains and more. Friday’s 0.3 per cent bounce left the index 12.3 per cent below its 52-week high of 26,373.20 and 4.3 per cent above its low.
It was an active week with multiple events that broke the benchmark index, from the tussle in the Tata group which may change the ownership structure of the parent company to an IRDAI circular that knocked out the market cap of insurance related companies to Brent touching $106. The week had its moment with NSE’s listing but the stock is down 0.39% from its listing price at Rs 1792 per share. Once more Indian markets were reminded that they are not decoupled from global events as US 10-year and 30-year bond yields touched 5.18 per cent and 5.35 per cent respectively.
Brent crude fell 11.5 per cent over the week to $98.59 a barrel from $111.35 on September 18. India’s benchmark 10-year government bond yield rose 5 basis points over the week to 7.119 per cent, the best close since May 18 (7.131 per cent), taking its rise since the Iran war to 46 basis points and to 62 basis points over the past year, according to a Business Standard analysis. The rupee weakened marginally, slipping 0.06 per cent for the week to 95.82 against the dollar.
IT lost ₹48,435 crore (2.1 per cent) and the insurance companies lost 7000 crore (0.6 per cent) in market value during the week. PB Fintech, an insurance distribution company lost 28000 crore or 33 per cent throughout the week.
Insurance stocks bore the brunt of the hardening yields, with the BSE Insurance index down 2 per cent for the week to 1,486.5 points. The NSE’s Nifty Insurance gauge was already down 10.5 per cent over the past year as of August 31, with SBI Life, HDFC Life and Life Insurance Corporation of India together accounting for over 52 per cent of the index’s weight, the NSE factsheet showed.
“PB indicated non-life NPV could fall to 33-40 per cent of original NPV, should IRDA’s proposed commission cuts in health and motor insurance be implemented. The co expects NPV in life insurance to be similar to present levels considering higher renewal commissions in term. We estimate a 10 per cent cut in new business commission rates translate to a 10-12 per cent fall in earnings,” said Jeffries in a report authored by Supratim Datta, Prakhar Sharma and Satvik Kanabar, adding that, “The co indicated 20 per cent of revenues (~40 per cent of expenses) is going towards running call centers. PB may slow hiring and reduce marketing in the near-term. IRDAI’s proposed regulations could have a material adverse impact on PB’s near-term earnings should it be implemented.”
The slide follows the Insurance Regulatory and Development Authority of India’s plan to release a consultation paper overhauling insurance distribution rules, which could restructure commission frameworks for online aggregators such as PB Fintech’s Policybazaar. Shares of the company, which commands a near-90 per cent share of the online insurance aggregator market, have been under pressure for much of the past year.
But it was the Tata group that made the headlines with the Tata Sons board’s reappointment of N Chandrasekaran as chairman, opposed by Noel Tata-led Tata Trusts, dominated trader chatter. The Tata group’s losses were spread across 18 of its 23 listed companies, which together lost ₹40,681 crore before gains in five others, led by Titan and Tata Steel, trimmed the net loss.
The market is positive that both the Tata tussle and the IRDA issue can be sorted out with more discussions. But there is not much that we can do about the global events that simply make the cost of money rise.
“India is a collateral damage in that. And there is no way that foreign investors are going to bring money in India despite our yields also going up. So I think we’re just caught in that. In India, the crude prices are not cooling off. And then RBI also worried that inflation is creeping up, it will reflect in prices”, Agarwal says.
