Benchmark indices Nifty and Sensex fell further from the morning and extended their decline for the seventh trading session in a row after a sharp downturn in IT stocks dented sentiment across the market. Concerns grew over a slower pace of US interest rate cuts following retail sales and rising import prices. The market sentiment has turned cautious, shifting from a "buy the dip" approach to "sell on the rise," with the recent 10 percent decline from peak levels seen as a technical correction
At about 10 am, the Sensex was down 390.49 points or 0.50 percent at 77,189.82, and the Nifty was down 127.00 points or 0.54 percent at 23,405.70. About 1131 shares advanced, 2132 shares declined, and 108 shares unchanged.
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"The sentiment in the market doesn't seem exciting as there's a lot of pressure on the Nifty and broader market. While the mid-small cap indexes could see more pain due to inflated valuations, the froth in headline indices could largely be over," Aishvarya Dadheech of Fident Asset Management told Moneycontrol.
One of the primary reasons for the fall in markets is the large selloff by foreign institutional investors (FIIs). While Dadheech suggests that the pace of selling has decreased, he cautions that the selling trend could linger on for the rest of the calendar year. To be sure, FIIs sold Rs 1,850 crore on Thursday, and have sold a total of Rs 29,533 crore in markets in November.
Also read: MPC has a perfect case to defer rate cuts beyond December
Furthermore, India Inc.'s Q2 earnings season have revealed signs of weakness, with downgrades outpacing upgrades. Nifty companies posted a 4 percent year-on-year profit growth in Q2, marking the second consecutive quarter of single-digit bottom-line growth—a streak not seen since the pandemic.
Hero MotoCorp shares were buzzing, rising over 4 percent following its Q2 results. The company saw a 14 percent year-on-year (YoY) increase in its standalone net profit at Rs 1,204 crore due to a sharp rise in volumes. The company's standalone revenue from operations rose 11 percent to Rs 10,483 crore for the September quarter as compared to Rs 9,533 crore in the year-ago period. Brokerages like Jefferies, Nomura and Nuvama have dished out 'buy' calls on the stock.
The broader market, represented by the midcap and smallcap indices, also mirrored overall trends after the two fell 0.6 and 1 percent, respectively. Despite the recent pressure, both indices have gained 17 percent since the start of the year, significantly outpacing the Nifty's 8 percent rise during the same period.
"Markets remain volatile on the back of subdued Q2 results, rising dollar index and continuous FII selling over the past month and a half. After a 14-month high domestic retail inflation number, the wholesale inflation too returned above 2 percent in October, reaching a four-month high, rising from 1.84 percent recorded a month back," Siddharth Khemka, Health of Research and Wealth Management at Motilal Oswal, said.
Read more: FPIs withdraw Rs 22,420 crore from Indian markets in November. What's driving the selling-spree?
Among sectors, Nifty IT was the worst performer after the index tanked 2 percent. Heavyweights like Infosys, LTIMindtree, and Wipro dragged the index lower. On the other hand, Nifty Metal and Realty rose up to a percent after stocks like Vedanta, Hindalco, and and Tata Steel kept the sentiment upbeat.
Dadheech mentioned that IT stocks, despite the fall, seem attractive as high discretionary spending by US companies on the back of tax cuts likely to be imposed by President-elect Donald Trump.
"From a technical standpoint, the Nifty faces immediate resistance in the 23,800 to 24,000 range. The index is currently trading near its 200-day Exponential Moving Average (EMA) on the daily chart, with immediate support seen in the 23,350 to 23,300 range. This support zone may attract buying interest from opportunistic traders," Mandar Bhojane, Research Analyst at Choice Broking, said.
Hero MotoCopr, Hindalco, Bajaj Finance, Asian Paints, and HDFC Bank were the top gainers on the Nifty. Dr Reddy's, Infosys, Tech Mahindra, Wipro and TCS were the top losers.
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