The Indian equity market witnessed sharp selling in the final hours of trade on Wednesday, with index heavyweights Sensex and Nifty falling over 1.5% amid weak global cues and sustained fund outflows by foreign investors. As a result, investors witnessed a sharp erosion in wealth, with the market capitalisation of BSE-listed companies dropping by ₹8.87 lakh crore. The total market cap fell to ₹428.74 lakh crore from ₹438.53 lakh crore in the previous trading session.
Extending its losing streak for the second straight session, the BSE Sensex declined as much as 1,142 points, or 1.45%, to hit an intraday low of 77,533 today as sell-off intensified in the final session. Similarly, the NSE Nifty lost 374 points, or 1.56%, to touch a low of 23,509 during the session.
Finally, the 30-share Sensex ended 984 points lower at 77,690, and the Nifty50 closed down by 324 points at 23,559 level. In line with benchmark indices, the broader market also witnessed sharp correction, with the BSE midcap and smallcap indices shedding 2.5% and 3%, respectively.
“Relentless selling by FIIs amid weak corporate earnings and a sharp surge in domestic inflation to a 14-month high have further impacted investor sentiment, dashing hopes for a near-term rate cut by the RBI,” says Vinod Nair, Head of Research, Geojit Financial Services.
On the BSE Sensex pack, 27 out of 30 stocks, barring NTPC, Tata Motors, and Infosys, ended in red zone, led by Tata Steel, Mahindra and Mahindra, Adani Ports, State Bank of India, and JSW Steel, falling in the range of 2-3%. On the Nifty50, 44 out of 50 constituent stocks ended in negative terrain, with Hero MotoCorp, Hindalco, Tata Steel, Mahindra & Mahindra, and Eicher Motors emerging as top laggards.
On the sectoral front, all the sectoral indices settled in red, with Nifty PSU Bank and Realty indices topping the chart by losing over 3%. Among others, bank nifty, auto, media, metal, and private bank also saw correction, falling 2% each.
“Mid and smallcap stocks were the worst hit, while the Financials and Auto sectors also showed significant weakness. This trend is mirrored across all emerging markets, as markets are jittery about future US policy actions, including trade-related implications for the world economy, which is reflected in the strengthening US dollar and rising yields," says Nair of Geojit Financial Services.
At the current level, Sensex and Nifty are nearly 10% down from its 52-week high of 26,277 and 85,978, respectively. “Nifty has experienced its first significant correction in terms of both time and price since March 2023. This sell-off was sparked by China’s new stimulus package, which has diverted FII flows from India to China. Additionally, weaker-than-expected Q2 earnings from Indian companies, particularly in the consumption sector, have further intensified FII selling, leading to record outflows from Indian equities over the past month and a half,” says Santosh Meena, Head of Research, Swastika Investmart Ltd.
According to Meena, the rising U.S. bond yields and a strengthening Dollar index, are adding pressure for emerging markets like India.
“Nifty is now trading near its 200-DMA and is heavily oversold, suggesting a potential temporary bottom around the 23,500 level. However, the 24,500 level will likely serve as a key resistance. Given these conditions, a relief rally in Nifty and Bank Nifty appears possible, though Midcap and Smallcap indices may still face further downside risk,” he says.
Shrikant Chouhan, Head Equity Research, Kotak Securities, in his technical report says that bearish candle on daily charts indicating further weakness from the current levels. “We are of the view that, the current market texture is weak but oversold hence; we could expect one quick intraday pullback rally from the current levels.”
“For the traders now, 200 day SMA (Simple Moving Average) or 23500/77500 would act as a sacrosanct support zone. Above the same, we could expect one technical bounce back till 23800-23850/78300-78500. On the flip side, fresh selloff possible only after dismissal of 23500/77500. Below which, it could slip till 23380-23350/77200-77000,” the report highlighted.
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