Nifty below 25,000, Sensex off day's lows while broader markets outperform; selling in IT, auto drags

BSE and InterGlobe Aviation shares may join the Nifty 50 index in September.

After opening in the deep red, Dalal Street managed to shrug off a portion its losses on Monday, June 23, as stock-specific moves supported losses in a volatile session on trade, while the broader end of the markets outperformed.

At close, the Sensex was down 511.38 points or 0.62 percent at 81,896.79, and the Nifty was down 140.50 points or 0.56 percent at 24,971.90. About 1,794 shares advanced, 2,113 shares declined, and 175 shares were unchanged.

The risk-off sentiment that took over investors' sentiment following the escalation of tensions in the Middle East abated towards the end of the session. Volatility, measured by the India VIX index, spiked over 5 percent, but moderated to stand near 14.09, up two percent.

While the benchmark indices faced selling pressure, the mid-cap and small-cap segments shone bright, which indicated investor participation in the wider end of the market. The Nifty Midcap 100 and Nifty Smallcap 100 gained 0.3 percent and 0.7 percent, respectively.

Nifty IT took a beating in trade, after U.S.-based IT bellwether Accenture reported its earnings for the May quarter, flagging lower growth going ahead, along with rising uncertainties. The index sank over 1.4 percent in trade.

The auto pack also fell one percent, as the transport ministry made anti-lock braking systems (ABS) mandatory for all new scooters and motorcycles. International brokerage Nomura expects two-wheeler demand to take a hit of 2–4 percent.

The Nifty Media index rallied over four percent, led by optimism in Zee Entertainment shares. The firm is planning to optimize its growth strategy to focus on acquiring a larger viewership, along with boosting probability.

The defence pack recorded sharp gains as the tensions in the Middle East escalated over the weekend. The Nifty India Defence index rallied over two percent, led by Garden Reach Shipbuilders and Zen Technologies, which jumped up to seven percent.

"The market assessment is that there are limits to what Iran can do against US and Israel. That’s why the early market responses - crude prices, US futures, absence of panic in Asian markets - have been muted. Even though the possibility of the closure of Hormuz Strait is a threat, it is important to understand that this has always been only  a threat and the Strait had never been closed," said VK Vijayakumar, Chief Investment Strategist, Geojit Investments.

Vinod Nair, Head of Research, Geojit Investments added, "Despite the initial setback, the market recovered most of its losses, supported by gains in capital goods and metal stocks, as fears of an immediate oil supply disruption remained low."

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Asia's oldest bourse BSE and Indigo-parent InterGlobe Aviation may be included in the benchmark Nifty 50 index during the next review, said sources to CNBC-TV18. On the flip side, beleaguered lender IndusInd Bank and auto player Hero MotoCorp might be deleted from the index.

BSE is likely to be eligible for inclusion in the induces despite only being listed on the NSE, as it meets the required listing and trading criteria. The upcoming Nifty 50 index review is expected to be conducted in August, and the changes will be effective from September.

From a technical perspective, the Nifty 50 index has successfully upheld its critical support level of 20 DEMA, around 24,850-24,800, and subsequently at 24700, throughout the week. "This zone is
anticipated to provide robust support for the index in the near term, particularly in the context of any anticipated challenges. 25,000-24,900 is to be seen as a cushion zone for minor blips," said  Sameet Chavan, Head Research, Technical and Derivative - Angel One.

"As we approach the contract expiry week, it is anticipated that volatility will increase following the current consolidation phase. It is imperative to remain vigilant regarding the setup and implement effective risk management practices," he added.

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