Sensex tanks 495 pts, Nifty at 24,750; Why India stock markets fell today?

Stock market highlights, market news: The BSE Sensex fell below the 81,000-mark intraday, while the NSE Nifty tested 24,700 during the day

Domestic benchmark indices Sensex and Nifty on Thursday, October 17, plunged amid the expiry of the weekly Nifty50 derivative (F&O) contracts. The BSE Sensex closed 494.75 points or 0.61 per cent lower at 81,006.61 levels. The NSE Nifty50, on the other hand, closed at 24,749.85, down 221.45 points or 0.89 per cent.

The indices hit intraday lows of 80,905.64 (down 596 points) and 24,728.90 (242 points), respectively. 

Here are few major reasons that are dragging the indices today: 

Bajaj Auto drags auto index 

Shares of Bajaj Auto dropped 13 per cent in trade after the two-wheeler company said it expects weak festive season sales due to rising inflation, especially in food prices, to limit their purchases. This statement also impacted other automakers and dragged the broader market. At close, the Nifty Auto index was down 3.54 per cent at 24,991. 

 

"The broad market selloff experienced today was driven by the 2W Original Equipment Manufacturer (OEM) Bajaj Auto’s comment on the weak festival sales, which rippled through the sector," said Sagar Shetty, research analyst, StoxBox. 

Shetty added: This comment fueled the investors' already pessimistic outlook, with the already underperforming results of the large-cap stocks.

Foreign Institutional Investors (FII) selling 

As per Shetty, the FII diverting their funds into Chinese markets worsened the market sentiment. 

On Wednesday, as per NSE data, FII sold Rs 3,435.94 crore worth of equities in the Indian markets. 

Weakness in Asian stocks 

China's mainline CSI 300, Shanghai, and Hong Kong's Heng Seng were down over 1 per cent in trade as the housing policy briefing in China failed to excite investors and property stocks slumped.

Chinese Minister of Housing and Urban-Rural Development Ni Hong said on Thursday that they will expand a "white list" of housing projects eligible for financing and increase bank lending for such developments to 4 trillion yuan ($562 billion) by year-end.

Similarly, Japan's Nikkei last seen was trading lower by 0.64 per cent after weak September trade data.

Early today, Japan posted a fall in its September exports for the first time in 10 months by 1.7 per cent as against a growth of 4.3 per cent for the same period last year. Meanwhile, its imports for September came in at 2.1 per cent also missing the expectations of economists of 3.2 per cent. The figure was down from August’s growth of 2.3 per cent.

Big initial public offer (IPO) withdrawing liquidity 

Analysts believe that big IPOs like Hyundai Motor India IPO are impacting the liquidity in the secondary market. 

"Hyundai Motor India IPO size is Rs 28,000 crore. Such large IPOs tend to put some pressure on secondary markets as some amount of liquidity is withdrawn," said Manish Jain, director - institutional business (equity & fi) division, Mirae Asset Capital Markets. 

Delayed rate cut expectations

With a sharp rise in domestic inflation, the interest rate cut expectations are to be delayed. 

India's annual retail inflation came in at 5.49 per cent in September, its highest level in nine months, due to rising food prices. It rose sharply from 3.65 per cent in August and was above economists' forecast of 5.04 per cent. 

"CPI print came at 9 month high which in the medium term gives the feeling that rate cut might be delayed and the prices may remain elevated for some more time," said Jain. 

Technicals

Short term structure for the Nifty index, according to Aditya Agarwal, head of derivatives & technical analysis at Sanctum Wealth, looks weak and sell on rallies strategy can be used by traders.

On higher side, the Nifty index will find strong resistance around 24,950-25,050 levels and move towards those levels will be used by traders to reduce long exposure. A close below, 24,700 will trigger another round of selling that can drag index further towards 24,440/24,180 levels, he said. 

"Over the last 5-6 trading sessions, Nifty has been encountering strong resistance in the range of 25,200 to 25,250. This resistance level coincides with the 21-day Exponential Moving Average (DEMA), which has been a key technical barrier for the index. This convergence of resistance levels has contributed to today's market decline. Additionally, the volatility associated with the weekly expiry has added to the market's uncertainty," said Jigar S Patel, senior manager - technical research analyst, Anand Rathi Shares and Stock Brokers.