Introduction
India’s stock market, which is represented by the Sensex and Nifty, had a sharp decline following its accomplishment of becoming the world’s fourth largest stock market. The Nifty experienced a 1.5% decrease, while the Sensex saw a plunge of over 1,000 points. With a roughly 3% decline, the mid- and small-cap indices saw a more severe sell-off. The market capitalization of investors on Dalal Street lost over Rs 8 lakh crore. Banks, FMCG, oil and gas companies, and metals led the fall, although pharma stocks witnessed modest buying. RIL and HDFC Bank were two of the main causes of the market decline.
The Nifty also broke 1.5% to close below 21,250, while the Sensex dropped nearly 1,000 points to close at 70,371, just after India defeated Hong Kong to become the world’s fourth largest stock market. The market as a whole saw a deeper sell-off, with small- and mid-cap indices falling by about 3%. The market capitalization of all BSE-listed equities dropped to Rs 366.3 lakh crore throughout the process, costing investors on Dalal Street almost Rs 8 lakh billion.
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Banks, oil and gas companies, FMCG, and metals led the decline, defying the upward trend observed in global markets, while purchases were observed in pharmaceutical stocks.
RIL and HDFC Bank accounted for nearly half of the Nifty loss on their own.
“Red Sea and West Asian tensions are major causes for concern. Given the high values, the market will be affected if something goes wrong. Investors should therefore exercise caution even when they are hopeful, according to Dr. V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services.
Six causes account for today’s decline in the Sensex and Nifty:
First HDFC Bank
About one-third of today’s loss was attributed to the heavyweight counter alone, as HDFC Bank shares fell an additional 3% because investors were unwilling to purchase the decline that started with the disappointment of the December quarter data.
Not only did HDFC Bank have a 2% decline, but Nifty Bank also had a drop, with IDFC First Bank shares plummeting 6.5%, IndusInd Bank, PNB, AU Small Finance Bank, and SBI following suit.
2) RIL The second-largest
Contribution to today’s decline was the 2% decline in shares of Reliance Industries (RIL), the most valuable corporation in India. With a target price of Rs 2,910, global brokerage Citi has reduced the company to a neutral rating, citing RIL’s recent outperformance as bringing risk and reward into better balance. Its Q3 performance were essentially consistent.
Other oil and gas stocks were also under selling pressure, with cracks ranging from 4-6% in IOC, HPCL, Adani Total Gas, Oil India, ONGC, and BPCL.
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3) Sebi’s position on ownership standards
Despite lobbying from international banks and a segment of offshore fund managers to relax the restrictions ahead of the deadline, markets regulator Sebi may apply stricter ultimate beneficial ownership standards for foreign investors starting on February 1, ET reported today. Unofficial estimates suggest that funds failing to meet regulations may sell off Indian stocks for between Rs 1.5 lakh crore and Rs 2 lakh crore over the course of the next six months.
4) FIIs
FIIs have been net sellers of Indian stocks for more than Rs 13,000 crore this month, following two months of purchases. MFs have been leading domestic institutions in their efforts to absorb the sell-off.
5) Booking profits
Because ordinary investors have been buying stocks without any consideration for values, analysts have been warning for a while now that many companies, across sectors, are entering overbought zones.
Nifty has increased by almost 9% over the past three months, while mid- and small-cap indices have increased by about 17%.
6th, technical strain
Nifty saw an engulfing scenario on a weekly basis, with price absorbing much of the previous week’s movement. Selling pressure is evident here, and it might continue in the next sessions. Although the unstable bias still plagues Nifty at approximately 22,000, Nuvama noted that the underlying trend is kept positive by the support zone between 21,500 and 21,450.
(Disclaimer: The information provided in this blog post is for educational and informational purposes only. It does not constitute financial advice, and readers are encouraged to conduct their own research and seek professional guidance before making any investment decisions. The author is not responsible for any actions taken based on the content of this post).