Why Sensex fell 655 pts, Nifty below 24,200 ahead of Diwali Muhurat Trading

Indian bourses retreated heavily on Thursday, a day ahead of Diwali Muhurat Trading on November 1, with the BSE Sensex dropping 655 points or 0.81 per cent at 79,287.93 level, while the NSE’s Nifty50 slipping 168 points or 0.69 per cent at 24,172.60 level.   At close, the BSE Sensex shed 553.12 points, or 0.69 per cent, to settle at 79,389.06. Mirroring the Sensex, the Nifty50 ended lower by 135.50 points, or 0.56 per cent, to 24,205.35.

 

The key benchmarks went through another tough day at work on account of heightened selling by foreign institutional investors (FIIs), subdued quarterly earnings of companies, weakness in information technology (IT) majors and increased volatility ahead of Diwali Muhurat Trading session.   "The key benchmark indices traded with mild cuts while experiencing a broader sell-off in the technology sector due to weakness in the US IT companies, which has led the domestic IT companies to come under the shadow of underperformance. Investors remain cautious owing to weak domestic earnings for Q2," said Vinod Nair, head of research, Geojit Financial Services.

 

 

The index heavyweights that pulled the BSE Sensex down on Thursday in terms of contribution included ICICI Bank contributing 126 points. Other heavyweights subsumed, Infosys (122 points),TCS (91 points), Reliance Industries (75 points) and HCL Tech (50 points). 

 

26 out of 30 stocks were under pressure on the BSE Sensex with Tech Mahindra being the top lose, falling up to 4.5 per cent intraday and was followed by other IT majors, TCS (down 2.5 per cent), HCL Tech (down 3 per cent), Asian Paint (down 2.3 per cent) and Infosys (down 2.2 per cent)

 

Among sectoral trends, most sectors were trading in red except Nifty Pharma (up 1.69 per cent), Nifty Healthcare (up 1.64 per cent) and Nifty Media (up 0.70 per cent). The ones under severe stress included Nifty IT falling up to 2.80 per cent, followed by Nifty Consumer Durables, down 1.21 per cent. Others such as Nifty Financial Services, Nifty FMCG, Nifty Bank and Nifty Realty also fell around 1 per cent each in intraday deals. 

 

The broader markets, however, were trading mixed with BSE SmallCap index outperforming others, increasing 0.78 per cent at 52,748.32 level intraday. 

 

 The BSE MidCap index on the other hand fell in line with the benchmarks, down 0.92 per cent at 45,693.54 intraday. On the other hand, the volatility indicator -- India VIX, was up almost 2 per cent intraday.  Subdued Diwali trading

 

According to analysts, Diwali this year is unlikely to bring fireworks in the market as the Indian market has been underperforming in October with Nifty down 5.7 per cent when markets in US and Japan have delivered positive returns and China and Hong Kong have hugely outperformed. 

 

“India’s underperformance is driven by lofty valuations, relentless FII selling and concerns over slowing earnings growth. In the near-term, this scenario is unlikely to change, reversing the trend decisively,  even though mild pullbacks are possible,” said Dr. V K Vijayakumar, chief investment strategist, Geojit Financial Services.

 

He further said that the market is seeing stock specific action playing out, with better than expected results pushing stocks up, while worse than expected meeting with severe corrections.

 

Given the elevated valuations, and the possibility of continuing FII selling, stocks and sectors which have delivered good results and good guidance are likely to remain resilient, he added.   However, experts concluded that the market expects the momentum to reverse in second half of financial year 2024-25 due to a rebound in core sector data and government spending, which are likely to influence the Samvat 2081 investment strategy.

 

Technical View

Technical analysts hope that the 24300-150 region or the 23,900 horizontal support will hold for Nifty50, having no firm downside targets for the short term at this point. Alternatively, they eye for consistent trades above 24,470 or a direct rise above 24,540 to spark quick upside attempts. 

 

“Favoured view expects bears to regroup again at 24660 as well as 24770, but not necessarily leading to a collapse, but keeping both bulls and bears interested for a while,” said Anand James, chief market strategist, Geojit Financial Services

 

Global markets

The downturn in Indian benchmarks also came amid a similar slowness in the Asian markets. Japan’s benchmark Nikkei 225 slumped 0.50 per cent, while the Topix decreased by 0.30 per cent. South Korea’s Kospi gained 1.45 per cent, and Australia’s S&P/ASX 200 lost 0.25 per cent.

 

In the US on Wednesday, the tech-heavy Nasdaq Composite dipped 0.56 per cent after reaching a new record high earlier in the day. The S&P 500 lost 0.33 per cent, and the Dow Jones Industrial Average fell 0.22 per cent, closing at 42,141.54