By Tanvi Mehta and Gaurav Dogra
India's benchmark NSE Nifty is off to its weakest start to the October quarter since 2008 after a global sell-off on Thursday further dented investor sentiment just as the Indian economy enters its peak-demand festive season.
Across the globe, share markets sank in a sea of red after Wall Street suffered its worst drubbing in months, as fears over rising U.S. Treasury yields sparked a broad sell-off of risky assets.
The news spooked investors in India, which has been battling a depreciating currency, and fears of a credit crisis following a string of defaults at a major non-banking financial company.
The Indian rupee hit a lifetime low yet again on Thursday.
The NSE Nifty plunged as much as 3.07 percent to 10,138.60, its lowest level since April 4. It closed down 2.2 percent at 10,234.65.
The index has fallen over 6 percent this quarter, the biggest plunge since 2008 when it shed more than 16 percent in the same period.
"The medium-term target for Nifty as of now is 9,100 and we will see that in this financial year itself. A short-term target is difficult (to predict) given volatility," said Jay Thakkar, head technical and derivatives research at Anand Rathi Share and Stock Brokers.
The meltdown on Thursday also erased 1.65 trillion rupees ($22.28 billion) from Nifty 50 companies, which have already lost 4.12 trillion rupees so far this month as of Wednesday.
The Oct-Dec quarter is typically considered a good period for Indian markets, due to the festive season. Analysts remain hopeful that Thursday's rout will not dampen sentiment.
"Now we're better off on valuations compared to one month back... I won't extrapolate a couple of weeks of market data to say the festive season is (going to be) bad," said Gautam Duggad, head of research - institutional equities at Motilal Oswal Securities.
"We need to watch out if liquidity tightening continues," Duggad added.
The NSE Nifty now trades at a price to current fiscal year's estimated earnings (PE) of 19.2, lower than its two-year average of 19.65, according to Refinitiv data.
"Sentiment improves in the festival season and there is probability of a bounce," said Thakkar.
Index technicals also suggest a bounce in the near-term as the relative strength index (RSI) shows an oversold reading and the wave pattern suggests the index is not expected to breach the March 23 low of 9951.9 points in the near-term.
($1 = 74.0600 Indian rupees)