Sensex, Nifty slip over 1% each amid broad-based selloff; IT, auto stocks top laggards

Sensex down over 800 points, Nifty slips below 24,600

India’s benchmark indices, Sensex and Nifty, continued to trade in negative territory during the afternoon session on May 22. A broad-based selloff pulled the markets down sharply, affecting even midcap and smallcap stocks. Meanwhile, the India VIX — which reflects market volatility — showed a slight increase.

Around noon, the Sensex had dropped 819.57 points or 1.00 percent to reach 80,777.06, while the Nifty was down 240.45 points or 0.97 percent at 24,573.00. In terms of market breadth, 1,477 stocks advanced, 1,821 declined, and 130 remained unchanged.

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From a sector perspective, the Nifty IT index was the weakest performer. This came after global ratings agency Moody’s downgraded its outlook, and traders grew cautious over a new tax bill introduced by US President Donald Trump. Both developments raised concerns over rising fiscal deficit risks. As a result, major IT stocks like TCS, Infosys, HCL Tech, Wipro, and Tech Mahindra each fell by over 1 percent in intraday trade.

On the other hand, the Nifty Media and Nifty Metal indices managed to post modest gains. The Nifty Metal index extended its rally for the second day after China cut its benchmark lending rate by 10 basis points. Since China is the world’s largest producer and consumer of metals, any economic stimulus from its government is usually seen as a good sign for global metal demand, which in turn supports higher commodity prices.

Despite the selloff, analysts at ICICI Securities encouraged investors to consider the market dip as a buying opportunity, noting that strong support for the Nifty lies near the 24,200 mark. They predicted that the index could rise towards 25,500 in the near future.

They also pointed out an interesting historical trend: When foreign institutional investors (FIIs) sold more than Rs 30,000 crore during any given quarter, the Nifty's average return over the following 12 months was around 28 percent. In most such cases, FIIs returned to the market later, sparking fresh rallies.

Gautam Shah, Founder of Goldilocks Global Research, echoed a positive view. Speaking to CNBC-TV18, he said that the market still shows signs of strength typical of a bull market and is likely to head higher.

“There are no concerns visible on the charts right now. The markets are not significantly overbought. We believe the Nifty could rise to 25,600 and eventually hit a new all-time high. We also expect a wave of outperformance in small and midcap stocks (SMIDs),” he said.