The Indian equity markets extended losses in the afternoon trade on Thursday, November 28, with benchmark indices Sensex and Nifty slipping nearly 1.5 percent amid weakness in IT and auto stocks and concerns about global economic trends.
At 2.50 pm, BSE Sensex was down 1,161 points or 1.5 percent at 79,072, and NSE Nifty was down 351 points at 23,924 -- well below the 24,000 mark. Market breadth remained positive, with 1,869 shares advancing, 1,547 shares declining, and 88 unchanged.
Here are the key factors behind today’s market drop:
Weakness in IT and auto stocks
IT and auto stocks were the top drags on the Nifty, with sectoral indices falling 2.3 percent and 1.5 percent, respectively. Infosys shares fell 3.5 percent; TCS fell 1.9 percent; Tech Mahindra was down 2.5 percent; and HCL Tech was down 2.7 percent, leading the losses in the IT space.
Auto majors Mahindra & Mahindra (-3.3 percent) and Eicher Motors (-2.2 percent) were also among the top losers in the auto pack.
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The decline in IT stocks follows overnight the US inflation data, which signalled a slower-than-expected trajectory for rate cuts. This raises concerns about reduced client spending, a critical factor for Indian IT companies with high US exposure.
Global rate concerns impacting sentiment
Krishna Rao, co-head of equity broking at JM Financial Services, said, “We expect markets to remain volatile due to a lower pace of rate cuts given higher growth in the US, and likely higher inflation after Trump's presidential win.” A potential slowdown in the US rate cut trajectory has increased uncertainty for emerging markets, affecting overall investor sentiment.
A stronger US Dollar has also dented the appeal of emerging-market assets. Asian equities are under pressure, following the dollar’s recent advance and concerns over escalating trade tensions.
Technical resistance for Nifty
Sudeep Shah, Head - Technical & Derivatives at SBICAP Securities, said that the Nifty is struggling to move past the immediate resistance zone of 24,320-24,350, which aligns with its 100-day EMA. “A sustainable move above 24,350 could extend the pullback rally to 24,550 in the short term, but the downside support zones of 24,160-24,130 remain critical. Any breach of 24,130 could push the index lower to 23,980,” Shah said.
Cautious stance from institutions, FIIs may not turn aggressive buyers
V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services, highlighted the cautious stance of large institutions amid global uncertainties. "While the cessation of relentless FII selling is a positive, FIIs are unlikely to turn aggressive buyers given the strong dollar and macro headwinds in emerging markets," he said. Vijayakumar also noted that institutions are likely to wait for clarity on U.S. President-elect Donald Trump's policies and their impact on global trade.
Market outlook
The ongoing correction has brought valuations to more reasonable levels, with the Nifty’s price-to-earnings ratio moderating to an estimated 21x from October’s peak of 25.8. Anirudh Garg of Invasset PMS suggested raising cash levels in portfolios, citing stretched valuations. "Indian markets need to take a breather from current levels," he said.
While the cessation of FII selling provides some relief, experts anticipate volatility to persist in the near term as markets digest global cues and policy developments.
Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
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