Bears drag Nifty to one-month low, Sensex bleeds 700 points as financials lag; India VIX spikes 5%

India VIX jumped five percent in trade.

Bears dragged Dalal Street deep into the red, while selling pressure in key financial stocks also contributed to heavy losses in the Nifty 50 and Sensex indices, on Friday, July 25.

At close, the Sensex was down 721.08 points or 0.88 percent at 81,463.09, and the Nifty was down 225.10 points or 0.90 percent at 24,837. The Nifty 50 index hit a one-month low in trade. About 826 shares advanced, 2,654 shares declined, indicating that the advance-decline ratio was in favour of the bears, and 107 shares were unchanged.

Concerns of higher credit costs, increasing stress in the MSME portfolio, along with weak 2W/3W loans, led to the fall in the Bajaj Finance's shares, that sank up to six percent intraday. Further, no relief was seen for Bajaj Finserv either, despite a solid quarterly show. The sell-off seen in the Bajaj twins, coupled with the fall in blue-chip banking counters, led to serious losses in the both the indices.

All sectoral indices, barring pharma and healthcare, sank deep into the red. The Nifty Media index led losses, sinking over 2.5 percent, while the Nifty IT, Metal, Auto, PSU Bank, and Realty indices were over one percent lower each.

The broader markets too, extended losses, with the midcap and smallcap gauges sinking up to two percent, indicating broad-based selling. The volatility index, India VIX, spiked over five percent, soaring, as fear and caution increased across Dalal Street.

"The primary reason for this decline is the continuous selling by Foreign Institutional Investors (FIIs) in both the equity and Futures & Options (F&O) markets. FIIs remain uncomfortable with the valuations of the Indian equity market, even with improving macroeconomic and microeconomic indicators," said Santosh Meena, Head of Research, Swastika Investmart.

Furthermore, he added that the current earnings season, while not entirely disappointing, has also not been particularly encouraging. Adding to the uncertainty is the stalled trade deal between the US and India.

On the technical front, experts had suggested that a fresh sell-off is possible only after crossing the 25,000levels. "Since the Nifty has sunk below this level in trade, the market may retest 24,850. Conversely, if the market moves above 25,150, it could technically bounce back to 25,255. The uptrend could continue further, potentially taking the market to 25,350," Shrikant Chouhan, Head Equity Research, Kotak Securities said.

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