Monday mayhem: Sensex nosedives 1,000 points, Nifty below 23,100; mid, smallcaps plunge over 4%

Trent, Adani Enterprises, BPCL, Adani Ports, and BEL were the major laggards on the Nifty

Benchmark indices Nifty and Sensex plunged further into the red in the afternoon of January 13 after broad-based selling intensified on the bourses. Data shows that over Rs 12.39 lakh crore of market cap has been eroded during today's session. The broader markets came under fire the most as the mid and small-cap indices underperformed the frontline indices.

Mid- and small-caps witnessed sharper selling pressure with losses of 4 percent and 4.1 percent, respectively. Aishvarya Dadheech, CIO and Founder of Fident Asset Management says that some pain could continue in the mid and small-cap segments, although the Nifty and large caps may be entering oversold territory. The direction of the market will hinge on the ongoing earnings season, which, if disappointing, could prolong the negative sentiment.

Global cues further weighed on market sentiment, as Asia-Pacific stocks opened lower following Friday's US jobs report, which dampened hopes for imminent Federal Reserve rate cuts. Wall Street’s main indexes also ended the week in the red, compounding the pressure. Meanwhile, the dollar index soared to its highest level since 2022, putting additional strain on the Indian rupee, which opened at an all-time low of Rs 86.18 against the dollar.

At close, the Sensex was down 1,025.04 points or 1.32 percent at 76,353.87, and the Nifty was down 344.35 points or 1.47 percent at 23,087.15. About 442 shares advanced, 3,219 shares declined, and 101 shares unchanged.

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"Today's fall is due to strong US labour market data (NFP) that has strengthened the dollar and derailed expectations of Federal Reserve rate cuts. This has led to a significant outflow of funds from emerging markets, including India, exacerbating pressure on the broader market,"  Dadheech added. He noted that non-institutional investors, who had been supporting the market, have stepped back, contributing to the sell-off.

He believes the direction of the market will hinge on the ongoing earnings season, which, if disappointing, could prolong the negative sentiment. On rate cuts, he stated that the likelihood of cuts has diminished significantly. The RBI is unlikely to implement rate cuts soon due to current economic conditions, and any potential cuts in the US will depend on upcoming data over the next few months.

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All sectoral indices closed in the red, with all recording losses of over a percent. The Nifty Realty index took the hardest hit, plunging a mammoth 6.5 percent, while the Nifty PSU Bank index declined over 3 percent, extending its losing streak to a fourth session as weak Q3 updates from select banks dampened sentiment. Metal stocks came under significant pressure, with Tata Steel, JSW Steel, and Vedanta leading the declines. The Nifty Auto also slid nearly 3 percent led by M&M, Maruti Suzuki and Tata Motors. The FMCG, and Bank indices slipped between 1.2 percent each.

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Among individual stocks, online food delivery platform Zomato shares plunged over 6 percent, marking a fall of nearly 20 percent in the last three weeks. The fall in Zomato’s share price was accentuated after global brokerage firm Jefferies downgraded shares of Zomato to  'hold' last week, citing the sharp run-up in the stock through 2024 and concerns over rising competition in the quick commerce space.

Shares of PB Fintech tanked nearly 10 percent on January 13 after global brokerage firm Morgan Stanley downgraded the stock to an 'underweight' call as against the previous 'equal-weight' rating. The brokerage cites lower-than-expected profit emergence and high stock valuations as the triggers behind the downgrade.

Crude-sensitive stocks such as Asian Paints, Berger Paints, Shalimar Paints, Akzo Nobel, CEAT, Apollo Tyres and BKT slipped 3 percent after prices surged past $81 per barrel, hitting a three-month high. The rally was driven by expectations that expanded US sanctions on Russian oil producers and 183 vessels which were announced Friday, will disrupt Russian crude supplies to major importers China and India.

"The Nifty fell for the fifth session in six on Friday showing just how weak the market is. The area between 23,177 and 23,355 will continue to matter on the way down, while immediate resistance stands at 23600. Interestingly, even though the percentage of stocks in the Nifty above the 200-day average has fallen to 34, the 14-day momentum isn't oversold yet, which could mean more weakness could be ahead of us. For the day, let's watch 23,238 on the critical downside," Akshay Chinchalkar, Head of Research at Axis Securities said.

Axis Bank, IndusInd Bank, HUL, and TCS were the top gainers on the Nifty. Trent, Adani Enterprises, BPCL, Adani Ports, and BEL were the major laggards.

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