GQG selling rattles ITC, Adani stocks as Nifty hits 52-week low amid global yield shock

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GQG Partners’ aggressive selling of Indian stocks has put some of its biggest bets under pressure, with ITC and Adani group stocks bearing the brunt on Thursday, as a broader risk-off trade pushed the Nifty to a fresh 52-week low.

ITC fell nearly 4.03% after 36.66 crore shares, or 2.9% of the company, changed hands in a Rs 9,437-crore block deal at Rs 257 a share. The identities of the buyers and sellers were not immediately disclosed, but the transaction came days after GQG disclosed that it had reduced its ITC holding.

The ITC transaction has reinforced concerns about a broader GQG exit from some of its long-held Indian positions. GQG had already been cutting exposure to the Adani group, selling more than Rs 12,000 crore worth of Adani holdings during the June quarter, according to shareholding data.

Its selling has continued. Recent disclosed transactions include sales in Adani Enterprises, Adani Energy Solutions, Adani Green Energy and GMR Airports, while GQG has also bought some stocks, including JSW Steel.

The pressure on Adani stocks was particularly visible on Thursday. Adani Enterprises fell more than 4% in morning trade, while several group companies fell sharply as the broader market rout intensified.

But GQG's selling is arguably symptomatic rather than the cause of today's market weakness.

The Nifty fell to 22,182.55, its lowest level in 52 weeks, before recovering somewhat, while the broader market came under even greater pressure. The Nifty ended at 22,231 down 1.04% but the Nifty Midcap 100 and NSE Smallcap 100 lost 2.53% and 2.34% respectively.

The immediate problem is the increasingly hostile global macro backdrop.

The US 10-year Treasury yield has climbed to its highest level since 2002, while Brent crude has moved above $100 a barrel. Rising US yields increase the relative attractiveness of dollar assets and put pressure on emerging-market valuations, while higher oil prices are particularly uncomfortable for India because of its dependence on imported energy.

The RBI has now added another layer of uncertainty. It raised the repo rate by 25 basis points to 5.5%, its first rate increase in nearly four years, and shifted its stance to “calibrated tightening”. Brent traded at around $104.71 a barrel on Thursday.

That combination is particularly uncomfortable for richly valued equities.

Higher bond yields raise the discount rate used to value future corporate cash flows. In a DCF framework, a higher cost of capital mechanically reduces the present value of those cash flows. The impact is greatest on companies whose valuations are built on earnings and cash flows far into the future.

At the same time, higher crude can squeeze margins, widen India's external financing requirement and put pressure on the rupee.

And foreign investors are already voting with their feet.

Foreign investors sold more than Rs 6,100 crore of Indian equities on Wednesday, while October selling has accelerated. Cumulative foreign outflows from Indian equities this year have reached $28 billion.

The critical question now is whether domestic liquidity can continue to absorb that selling.

So far, it has. Domestic institutions bought roughly Rs 4,500 crore on Wednesday even as FIIs sold more than Rs 6,100 crore.

But the market is increasingly testing the assumption that domestic flows can indefinitely neutralise foreign selling.

This is a particularly important question when it comes to small- and mid-cap segment, where liquidity is thinner and valuations are more sensitive to marginal flows. The fact that these indices are now falling faster than the Nifty is an early warning.