Dear
Trader…
Indian benchmark equity indices fell sharply on Wednesday,
with the Sensex plunging over 980 points and the Nifty diving below the 23,600
mark. The market decline was driven by a spike in inflation, which dampened
hopes for a rate cut next month, adding to the concerns over dull earnings and
sustained foreign outflows.
The 30-share BSE benchmark Sensex declined 984 points or
1.25% to settle at 77,690. The broader NSE Nifty Future dropped 263 points or 1.10%
to end at 23,696.
The market capitalization of all listed companies on the BSE
decreased by Rs 6.8 lakh crore to Rs 430.45 lakh crore.
HDFC Bank, Reliance Industries, M&M, ICICI Bank, and
L&T collectively contributed 535 points to the overall decline in the
Sensex. SBI, TCS, Axis Bank, and Kotak Bank also weighed on the index.
On the sectoral front, Nifty Bank, Auto, Media, Metal, PSU
Bank, and Realty sectors dropped between 2% and 3.2%. Meanwhile, the fear
gauge, India VIX, rose 5% to 15.33.
Key factors behind today’s market crash: –
1. CPI inflation at 14-month high –
India’s consumer price inflation surged to a
14-month high in October, reaching 6.21%, up from 5.49% in September, driven
largely by escalating food prices, particularly vegetable and edible oils.This
spike has effectively reduced the likelihood of a rate cut by the Reserve Bank
of India (RBI) in its upcoming December policy review, as inflation now
breaches the upper limit of the central bank’s target range. The reduced
chances of a rate cut have added pressure to equity markets on Wednesday,
contributing to the decline in Indian benchmark indices.
2. Continued FII selling amid China’s stimulus –
Foreign Institutional Investors (FIIs) have
continued to pull funds from Indian equities, marking 32 consecutive sessions
of selling, as investors are drawn to China’s stimulus measures and more
favourable valuations there. These outflows have amounted to around $14
billion. The continued selling has dampened the market sentiment, contributing to
increased volatility and added pressure on the Indian equity markets.
4. Nifty below 200-DMA
–
It was just less than 2 months ago on 27
September when the Sensex scaled its last 52-week high of 85,978. By ending 984
points during the day, Sensex slipped below the 78,000-mark while Nifty fell
near the 23,550-level. The sell-off made Nifty fall below its 200-DMA for the
first time since April 2023 during the day.This is the first significant
correction in the market in terms of both time and price since March 2023, said
Santosh Meena, Head of Research, Swastika Investmart.
5. Investors’ cautious stance ahead of Maharashtra Election –
Investors are adopting a cautious stance ahead of
the Maharashtra election due to the potential political uncertainties they
could bring. Given Maharashtra’s significance as an economic hub and a key
political battleground, the outcome could impact policy decisions and investor
sentiment, particularly in sectors closely tied to government actions.
6. Nervousness ahead of US inflation data –
Investors were also cautious ahead of the US
inflation data due later in the day. The October 2024 inflation report is
crucial, as it will provide insights into inflation trends and influence the
U.S. Federal Reserve’s stance on rate cuts. A higher-than-expected CPI could
heighten concerns about the Fed’s hawkish stance, while a softer reading may
bolster expectations for a more dovish approach.
Traders currently lay 62% odds for the Fed to cut
rates by a quarter point on December 18 at the conclusion of its next policy
meeting, according to CME Group’s FedWatch Tool. A week earlier, the
probability was 77%.
Nifty futures opened at 23889 points against the
previous close of 23959 and opened at a low 23605 points. Nifty Future closed
with an average movement of 340 points and decline of around 263 points and
closed 23696 points…!!
Meanwhile, From the emerging market perspective, the rise in the dollar
index and the sharp spike in the US 10-year bond yield to 4.42% are causes of
concern. Such high yields in US bonds will facilitate more outflows from
emerging markets to the US. This will continue to be a headwind for India.
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.
Technically, the
important key resistances are placed in Nifty future are at 23696 levels, which
could offer for the market on the higher side. stainability above this zone
would signal opens the door for a directional up move with immediate
resistances seen at 23747 – 23880 levels. Immediate support is placed at 23474 –
23404 levels.
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in securities market are subject to market risks. Read Disclaimer and related
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