Sensex settles 200 pts lower from day's high, Nifty ends below 26,050: 5 key reasons behind market decline

Stock market today: Sensex, Nifty see profit booking in volatile trade. 

The equity benchmarks pared some of their gains in a highly volatile session on Thursday as profit-booking pulled the indices off their intraday highs. The Sensex slipped about 200 points from its peak, while the Nifty fell below 26,050 during the session.

The Sensex opened on a weak note, declining 156.83 points to 84,949.98. The Nifty too eased 47 points to 25,938.95. Both indices later recouped losses, with the Sensex trading 369.80 points higher at 85,476.62 and the Nifty at 26,096.25, up 110.25 points.

However, the Senex settled 158.51 points or 0.19 percent higher at 85,265.32, while the Nifty advanced to 26,033.75, down 47.75 points or 0.18 percent.

InterGlobe Aviation, Dr. Reddy's Laboratories and Kotak Mahindra Bank were among the major laggards in the Nifty50 pack, declining up to 2 percent, while Tata Consultancy Services and Tech Mahindra Limited were the top gainers, rising up to 2 percent. Market breadth remained negative as about 1765 shares advanced, 1848 shares declined and 151 shares unchanged.

Key factors behind market decline

1) Rupee under pressure: The rupee fell 28 paise to a fresh low of 90.43 against the US dollar in early trade. A weakening currency typically dampens market sentiment as it prompt foreign investors to turn cautious.

2) Sustained FII selling: Foreign Institutional Investors offloaded equities worth Rs 3,206.92 crore on Wednesday, marking the fifth straight session of outflows. Persistent selling by overseas investors has continued to put pressure on domestic equities.

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3) Caution ahead of RBI policy: The Reserve Bank of India’s Monetary Policy Committee will announce its policy decision on Friday. With growth staying strong and the rupee weakening, investors are unsure whether the central bank will signal any shift in its stance.

"Investors are focused on the RBI’s policy call and tone," Kranthi Bathini, Director of Equity Strategy at Wealthmills Securities told Reuters.

Adding to the cautious mood, Prashanth Tapse, Senior VP (Research) at Mehta Equities Ltd, said "Nifty slipped below the 26,000 mark yesterday, extending its losing streak to a fourth straight session with market breadth firmly favouring the bears. A sliding rupee and persistent FII outflows continue to weigh on sentiment, while upcoming RBI and Fed policy decisions and geopolitical developments could add fresh volatility."

4) Weekly expiry: Volatility picked up as traders squared off positions on the weekly derivatives expiry, leading to frequent swings between positive and negative territory.

5) Firm crude prices: Brent crude rose 0.35 percent to USD 62.89 per barrel. Higher crude prices tend to unsettle domestic markets as they can push up import costs and impact inflation expectations.

Technical view

Anand James, Chief Market Strategist at Geojit Financial Services, said the Nifty’s attempt to recover appeared to have paused near the 26,000 mark. "A phase of consolidation may be required before a move towards 26,111 or a break above 26,200,” he said. “However, a fall below 25,935 could confirm a resumption of the downside."

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