The benchmark equity indices Sensex and Nifty settled lower on Thursday, tracking weak investor sentiment after the United States imposed higher tariffs on India.
Sensex declined 705.97 points or 0.87 percent to settle at 80,080.57. During the day, it dropped 773.52 points or 0.95 percent to 80,013.02. The Nifty dived 211.15 points or 0.85 percent to 24,500.90.
Shriram Finance, HCL Technologies, Sun Pharmaceutical Industries, Tata Motors and Tata Consultancy Services were among the major laggards, declining up to 3 percent intraday.
Factors behind market decline:
1) Higher US tariffs: An additional 25 percent tariff imposed by US President Donald Trump on India over purchases of Russian oil came into effect on Wednesday, raising the overall duty to 50 percent. Domestic markets were shut on Wednesday due to Ganesh Chaturthi festival.
"The 50 percent tariff imposed on India, which has already come into effect, will weigh on market sentiments in the near term. But the market is unlikely to panic since these tariffs are seen as temporary and expected to be resolved," said VK Vijayakumar, Chief Investment Strategist, Geojit Financial Services. He added that high valuations and muted earnings growth remain a concern.
2) Consistent FII selling: Foreign Institutional Investors (FIIs) sold equities worth Rs 6,516.49 crore on Tuesday, as per exchange data. Domestic Institutional Investors (DIIs), however, purchased shares worth Rs 7,060.37 crore.
"The strong pillar of support to the market is the aggressive buying by DIIs flush with funds. Any selling by FIIs will be easily neutralised by this," Vijayakumar said.
3) Rise in Volatility index: The India VIX, regarded as a measure of market fear, rose to 12.22, signalling increased uncertainty and volatility expectations.
4) Monthly Expiry: Thursday also happens to be the NSE monthly derivatives expiry, a factor typically associated with heightened market volatility.
Technical outlook
Anand James, Chief Market Strategist, Geojit Financial Services, said the Nifty has entered a bearish zone.
"Having slipped into the bear territory, 24,071–23,860 objectives are now in play. However, a near 2 percent fall in just four days has left room for upswing possibilities, with resistances at 24,780 and 24,870. Alternatively, inability to float above 24,630 or clear 24,900 will indicate continued bearish control," James said.
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