Broader markets bleed as mid, smallcaps lag; 70 stocks plunge in double digits

Market This Week

Broader markets underperformed the benchmark indices in the volatile week as escalating US-Iran geopolitical tensions, rising crude oil prices, and persistent FII selling weighed on investor sentiment.

This week, the BSE Sensex slipped 2,368.29 points, or 2.91 percent, to finish at 78,918.90, while the Nifty50 shed 728.2 points, or 2.89 percent, to close at 24,450.45.

However, BSE Midcap, Smallcap, and Largecap indices fell 3 percent each during the week.

Most sectoral indices ended in the red during the week. The Nifty PSU Bank index declined 6.5 percent, followed by the Nifty Realty index, which fell 5 percent. The Nifty Bank index dropped 4.5 percent, while the Nifty Media index slipped 4.3 percent and the Nifty Private Bank index shed 4 percent. However, the Nifty Defence index bucked the trend, gaining nearly 5 percent.

"The global markets reacted strongly to the geopolitical tensions in the Middle East, where the domestic market witnessed a nosedive correction. The oil prices skyrocketed to above USD 85 while the Indian rupee has weakened, reflecting concerns over prolonged disruptions to crude supply—a critical input for India’s economy. A sustained rise in oil prices could weigh on investor sentiment and adversely affect India’s twin deficits, inflation trajectory, and the RBI’s monetary stance. An uptick in the U.S. 10 year bond yield and a stronger dollar have prompted FIIs to adopt a risk-off approach toward domestic equities," said Vinod Nair, Head of Research, Geojit Investments.

"The selling was broad-based, where realty, banks, and auto underperformed while defense gained some ground due to the evolving geopolitical landscape and increased budget outlay. The India VIX has edged higher, signalling increased uncertainty and risk aversion among market participants," Nair added.

"Investors are moving towards traditional safe-haven assets and adopting a cautious stance, awaiting greater clarity. We expect that reassurance over control of the Strait of Hormuz will help stabilize market sentiment. We advise avoiding a panic sell-off and adopting a disciplined, long-term perspective and exercising patience over the next several weeks, as current price levels may offer a strategic entry point for medium- to long-term investors," he said further.

Foreign Institutional Investors (FIIs) sold equities worth Rs 21,831.19 crore, extending their selling streak to the third consecutive week. Meanwhile, Domestic Institutional Investors (DIIs) remained net buyers, purchasing equities worth Rs 32,786.92 crore, during the week.

The BSE Smallcap index fell 3.3 percent during the week, with InfoBeans Technologies, Worth Investment & Trading, Orchid Pharma, Sadhana Nitrochem, Rajesh Exports, Netweb Technologies India, Agarwal Industrial Corporation, JTL Industries, D. P. Abhushan, Stallion India Fluorochemicals falling between 15-25 percent. On the other hand, Jindal Poly Films, Jindal Drilling Industries, Hindustan Oil Exploration Company, Ruby Mills, Paras Defence and Space Technologies, Antelopus Selan Energy, Axtel Industries, Sterlite Technologies, Jupiter Wagons added between 12-25 percent.

Where is the market headed?

Nagaraj Shetti, Senior Technical Research Analyst at HDFC Securities

After a fine recovery from the lows of 24300 in the last couple of sessions, Nifty failed to sustain the gains on Friday and slipped into weakness by 315 points. After opening on a weak note, the market shifted into a range-bound action for the better part of the session. Weakness intensified towards the end, and Nifty finally closed at the lows.

A long bear candle was formed on the daily chart beside the bull candle of Thursday. The present market action signals that Nifty has negated the bullish sentiment that was created after the sharp gain of Thursday.

This is not a good sign, and it suggests that the Nifty could retest Wednesday's low of 24300 in the short term. Immediate resistance is placed at 24700.

Rupak De, Senior Technical Analyst at LKP Securities

Bears returned to the market as the Nifty slipped back after a one-day rebound. Thursday’s bounce was neither wholehearted nor convincing, leading to selling on Friday. Besides, investors preferred to stay light ahead of the weekend.

Technically, the index remains below the previous swing low, indicating continued bearishness.

In the short term, the index may continue to decline, with the potential to move towards 24,000 or lower. On the higher side, resistance is placed at 25,000; until this level is crossed decisively, the trend is likely to favor a sell-on-rise strategy.

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