After a day’s respite bears clawed back to Dalal Street to tighten their grip on domestic as well as Asia-Pacific equity markets on Friday following another massive sell-off in America’s Wall Street that cracked Dow Jones more than 4 per cent or 1,000 points at the close of overnight trade.

“Markets are undergoing much awaited (and required) correction. Traders are advising to stay light and avoid any kind of bottom-fishing soon,” said Angel Broking in a note. Analysts blame it on jump in bond yields and a US paradox where impressive job and wages data and in turn firming up of economy has given rise to the possibility of upside inflationary pressure and hike in the Federal Reserve’s policy interest rate.

The 30-stock Sensitive Index of Bombay Stock Exchange and 50-scrip Nifty of National Stock Exchange gave away Thursday’s gains as selling pressure mounted right at the start of the day’s trade pulling them down in line with other regional markets. Bank shares were again singled out by traders for excessive hammering.

The Sensex closed 34,005.76 (-407.40) points down 1.18 per cent. Nifty ended 10,454.95 (-121.90) points shedding 1.15 per cent. Bank Nifty settled down losing 1.76 per cent at 25,463.65 (-457) points. In Sensex seven shares were up and 24 down. For Nifty the ratio was 12:38. The global mayhem took a heavy toll of indices across all major exchanges. Having gained an impressive 28 per cent until the last week of January, the indices lost almost a quarter of those gains in just nine post Budget 2018-19 trading sessions in Dalal Street.

Elsewhere in the region, the Nikkei was down 2.32 per cent at 21,382.62 (-508.24) points. Shanghai Composite was the biggest loser at 3,130.93 (-131.12) points -4.05 per cent; Straits Times 3,371.41(-44.49) points -1.30 per cent; and Hang Seng 29,507.42 (-943.55)points down 3.10 per cent.

Veteran equity market strategist Jim Rogers observed that the next bear market would be more catastrophic than any other market downturns that he had lived through. However, there are still two opinions on whether the correction is over and investors should start buying on dips. Foreign funds that pumped in `9,568 crore in January are still net sellers in February as they booked profit as sellers in net equity sale of `2,393.15 crore.

FPIs are cautious on account of developments back in the US and long-term capital gain or LTCG Tax on equity earnings taking effect on 1 April. Hong Kong-based CLSA has opposed the tax. Its managing director Christopher Wood said the decision to levy 10 per cent LTCG Tax was “unfortunate”.

It made CLSA reduce its “overweight stance on India in the Asia-Pacific (ex-Japan) relative return portfolio by 2 per cent.” Development was negative as India’s equity culture was being promoted by salaried workers in recent years who were signing up tax-saving schemes (offered by MFs). Risk is slowdown in inflows into equity MFs for more than just one month (January).” Latest data shows asset-base of equity MFs in January at `22.41 lakh crore.

However, this view was contradicted by Goldman Sachs Asset Management strategist Katie Koch who said their clients were getting more positive on Indian economy and LTCG Tax might not sway their investment pattern….( although) zero is always better than 10. “LTCG Tax is low in line with other major markets that don’t charge too much on investment profits. It bodes well for the economy.”

BNP Paribas MF in its weekly report said, “Government bond yields on the rise on account of higher than expected fiscal deficit , inflation worries and higher government borrowings. Growth in retail credit demand is now supplemented with working capital demand bodes well for economy.” The French bank sees relocation of some funds by investors from equity to debt market.

In the Sensex the losers included Yes Bank `325.70  (-2.70 per cent); ICICI Bank `327.45 (-2.12 per cent); SBI `295.35 (-2.02 per cent). Among gainers were Tata Steel `684, 1.88 per cent; and Dr Reddy’s Labs `2,197, 0.83 per cent.