Sensex declines 350 pts from day's high, Nifty below 25,400: Profit booking, 4 other reasons behind market paring gains

Sensex, Nifty see profit-booking in September 18 trade.

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The benchmark equity indices pared early gains and traded lower in late afternoon trade on Thursday amid profit-booking.

Sensex, which had advanced 447.5 points to a high of 83,141.21 in early trade, later dropped 364 points from the day’s peak to 82,777 at around 2:30 p.m. The broader Nifty, after touching 25,448.95, slipped below the 25,400 mark.

Among the sectoral indices, auto, metal, PSU bank and realty fell up to 0.4 percent. Coal India, Bajaj Finance, Trent, ONGC and Tata Motors were among the major laggards, declining as much as 2 percent.

Factors behind the decline:

1) Profit-booking: Investors booked profits at higher levels, particularly in banking and auto shares, which weighed on overall market sentiment.

2) Weak rupee: Rupee slipped on Thursday, pressured by a firmer dollar and higher US Treasury yields after the Federal Reserve's widely expected 25 basis points cut left investors parsing mixed signals from its projections and commentary. A weaker rupee typically dampens foreign investor appetite.

The rupee was down 0.3% at 88.0650 against the U.S. dollar, in line with weakness among regional peers and halting a four day streak of gains.

The US central bank expectedly cut interest rates by 25 basis points on Wednesday but Fed Chair Powell characterised action as a risk-management cut, which splintered from the dovish tilt expressed in policymakers' dot-plot interest rate projections.

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3) Expiry-day volatility: Thursday being the expiry day of Sensex F&O contracts, heightened volatility, which contributed to the sharp swings in the market.

4) FII selling: Foreign institutional investors offloaded equities worth Rs 1,124.54 crore on Wednesday. Persistent FII outflows have remained a key drag on markets.

5) Global cues: Asian markets traded lower with Shanghai Composite and Hong Kong’s Hang Seng losing up to 1.5 percent. US markets ended mixed on Wednesday, adding to investor caution.

Technical outlook

According to Anand James, Chief Market Strategist at Geojit Financial Services, the Nifty may move towards the 25,400–25,600 range. He said a downside marker is placed at 25,280, while a slip below 25,200 could open the way towards 24,800.

Disclaimer: The views and investment tips expressed by experts on Moneycontrol are their own and not those of the website or its management. Moneycontrol advises users to check with certified experts before taking any investment decisions.