The Indian benchmark indices struggled with losses in the afternoon trade on October 3, mirroring the weak trend across Asian counterparts.
A spike in US benchmark 10-year bonds yield to its highest level since 2007, the dollar index climbing above 107 and sustained selling from foreign institutional investors were the major factors dragging the market.
Rollovers of positions to the October F&O series also hint towards caution among investors, as reflected in the rise in short positions.
Around noon, the Sensex was down 361.58 points, or 0.55 percent, at 65,466.83, and the Nifty was down 128.30 points, or 0.65 percent, at 19,510.00. About 1,555 shares advanced, 1,578 declined, and 143 were unchanged.
"The major negative for the near-term will continue to be the sustained FII selling, which touched Rs 26,689 crore in the cash market in September,” said VK Vijayakumar, Chief Investment Strategist, at Geojit Financial Services.
The dollar index rising above 107 and the US 10-year bond yield at 16-year high of 4.7 percent are major headwinds for the market as FII selling will likely continue in response to a stronger American currency and bond yields, he said.
Vijayakumar, however, also expects the bullishness among DIIs and retail investors to lend support to the market.
"In the near term, these negative and positive factors can be expected to swing the market to and fro," he added.
On the upside, analysts see 19,800 as a major hurdle for the Nifty and until it remains below that level, the mood is likely to be “sell-on-rise”. On the downside, the support is at 19,300-19,350.
Stocks and sectors
Selling was seen across metal and oil names on the back of a spike in the dollar index and a decline in Brent crude. The drop in crude saw shares of ONGC fall nearly 4 percent to emerge as the worst hit on the Nifty50 list, while Hindalco was down 2.5 percent.
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Eicher Motors was another loser on the Nifty. It slumped over 3 percent after it a decline in sales of its flagship Royal Enfield motorcycles in September.
Maruti Suzuki also fell over 2 percent despite a rise in sales in September. The stock fell after the car manufacturer received a show-cause notice from the GST Authority, proposing to demand interest and impose penalty, besides appropriating tax already paid, amounting to Rs 139.3 crore.
Losses across some key constituents also weighed on the Nifty Auto index, pulling it down over a percent.
Other index-heavyweights like Reliance Industries, HDFC Bank and ICICI Bank were also down around a percent each, further putting pressure on the benchmarks.
On the other hand, Vedanta was in the spotlight after the stock surged 5 percent following the company's plans to demerge its business into six subsidiaries to unlock potential and solve its debt crisis.
Two listings were also in focus. JSW Infrastructure was off to a flyer, listing at a premium of 20 percent to its issue price. Buying momentum in the counter continued, as the stock gained another 10 percent post-listing.
Vaibhav Jewellers, however, had a lacklustre start, listing at par with its issue price of Rs 215 on both the NSE and BSE.
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