Sensex falls 350 pts from day's high, Nifty near 24,550: Key reasons behind market paring gains

IT index falls 1.1%, HCLTech, Coforge lead the losses; Kotak slashes target prices of these seven IT stocks

• Sensex and Nifty trimmed early gains amid late selling pressure.
• FII outflows and higher crude prices weighed on market sentiment.
• Profit booking in IT, FMCG, and banking stocks led to declines.

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The benchmark equity indices pared early gains on Thursday, with the Sensex slipping over 350 points from the day’s high and the Nifty trading near the 24,550 level amid last one-hour selling pressure due to profit booking and persistent foreign fund outflows.

After a firm start, the Sensex had jumped 564.47 points or 0.71 percent to touch an intraday high of 79,680.66 in early trade. The broader Nifty also advanced to 24,672.80, up 192.30 points or 0.78 percent.

However, the rally lost steam as the session progressed.

At around 2.15 pm, the Sensex was trading 196.66 points or 0.25 percent higher at 79,312.84. The Nifty was up 70.05 points or 0.29 percent at 24,550.55, after slipping below the 24,600 mark earlier in the afternoon.

HDFC Life Insurance Company, SBI Life Insurance Company and Hindustan Unilever were among the major laggards in the Nifty50 pack, declining up to 2 percent, while Hindalco Industries and Coal India were among the top gainers, rising up to 6 percent. Market breadth was positive as about 2038 shares advanced, 1792 shares declined and 138 shares unchanged.

Key factors behind market decline from day’s high

1) FII selling: Foreign Institutional Investors (FIIs) continued to remain net sellers in the Indian equity market. On Wednesday, FIIs offloaded equities worth Rs 8,752.65 crore. So far this month, foreign investors have sold shares worth moer than Rs 12,000 crore in Indian equities. Persistent selling by overseas investors tends to weigh on market sentiment and often leads to volatility in benchmark indices.

2) Higher crude prices: Global energy markets remained under pressure amid tensions in the Persian Gulf, raising concerns over disruption in oil and natural gas shipments. Brent crude, the global oil benchmark, rose 2.86 percent to USD 83.73 per barrel. Higher crude prices are seen as negative for India, which imports the bulk of its oil requirement.

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3) Profit booking: The investors booked profits in select sectors after the early rally. Selling was seen in information technology (IT), FMCG and banking stocks, which contributed to the indices trimming their gains.

Technical view

Anand James, Chief Market Strategist at Geojit Investments Limited, said the market saw sharp swings during recovery attempts.

"While wild swings amidst recovery attempts unfolded on expected lines, the hammering in the closing hour, shortly after filling the gap, takes away some upside momentum. The subsequent close near 24,450 lends a positive bias nevertheless," he said. According to him, the Nifty could see resistance around 24,625 and 24,840 levels, while a slip below 24,370 may open the possibility of a move towards 24,000–23,550. "A collapse is less expected today though," he added.

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