Indian benchmarks, Sensex and Nifty 50 ended in the red as a cocktail of global and domestic factors soured investor sentiment. A combination of profit-taking after record highs and mixed global cues put selling pressure on financial services, energy, and auto stocks.
After opening on a weak note, the selloff intensified in the last hour of trade, with the Sensex plunging over 1,200 points and the Nifty slipping below the critical 26,000 mark, reflecting growing caution among investors.
At close, the Sensex was down 1,272 points or 1.5 percent at 84,299, and the Nifty was down 356 points or 1.4 percent at 25,822. About 1,757 shares advanced, 2,107 shares declined, and 148 shares remained unchanged. Quarter-to-date (QTD), the Sensex and Nifty have risen by 6.7 percent and 7.5 percent, respectively.
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Market experts pointed to several triggers for today's downturn, including escalating Middle East tensions, investor jitters ahead of Federal Reserve Chair Jerome Powell's speech, and the natural profit booking that followed a recent record-breaking rally. Additionally, a surge in China's equity market, driven by favourable valuations and stimulus hopes, drew foreign investors away from Indian markets.
The broader markets weren't spared either. While the BSE Smallcap index remained flat, the Midcap index lost 0.3 percent. India VIX, a measure of market volatility, jumped 7 percent, indicating rising investor anxiety.
"Global markets turned topsy turvy under the threat of rising geopolitical risk in the Middle East and plausible increase in Yen interest rate which can reduce cross country investments in equity," said Vinod Nair, Head of Research at Geojit Financial Services. He further said that while China has seen a resurgence driven by a large stimulus package and attractive valuations, India has felt the impact of global pressures and high valuations.
Sectorally, the pain was widespread, with 11 out of 13 sectoral indices in the red. Nifty Auto slumped nearly 2 percent ahead of monthly auto sales data due on October 1. According to a Motilal Oswal research report, demand trends for automobiles remained weak across segments in September, despite the festive seasons of Ganesh and Onam. The inauspicious Shraddh period further impacted sales, resulting in a year-on-year decline in retail sales across categories, as per brokerages.
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Meanwhile, Nifty Metal defied the trend and rose for the eighth consecutive session, buoyed by a spike in iron ore prices and China's efforts to revitalize its struggling property market.
Ajit Banerjee, President and Chief Investment Officer (CIO) at Shriram Life Insurance Company said that all eyes are now on the RBI's MPC meeting next week. "We feel that the MPC would continue to maintain status quo on the policy rates, since it would like to start the rate cut cycle once it gets convinced that CPI inflation has been controlled in a relatively durable way and it will not be vulnerable to the food inflation fluctuations intermittently. Further, India, as of now, doesn't face the challenge of GDP growth falling consistently."
Among individual stocks, RIL, Axis Bank, and Hero MotoCorp were among the biggest losers, dropping 3-4 percent. On the flip side, Tata Steel, Hindalco, and JSW Steel gained 1-3 percent, riding the metal index's strength. New Nifty 50 entrants, BEL and Trent, stumbled on their first day as index constituents, falling over 3 percent each.
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