Sensex falls 300 pts from day's high, Nifty below 25,150: Weak global cues among key factors behind market decline

Sensex, Nifty see profit booking in July 16 trade. 

The equity benchmark indices Sensex and Nifty traded lower on Wednesday, tracking weak global cues and higher US inflation data, which dampened hopes of interest rate cuts by the US Federal Reserve. Uncertainty around trade tariffs and mixed corporate earnings also weighed on investor sentiment.

Sensex dropped 103.16 points to 82,467.75 after falling nearly 300 points from the day's high. The broader Nifty declined 56.75 points at 25,139.05.

Mahindra & Mahindra, Tata Motors, Tata Steel, Bajaj Finance, Bajaj Finserv, and Eternals were among the major laggards.

Key factors behind the decline:

1) Weak global cues: Asian markets, including South Korea's Kospi, Japan’s Nikkei 225, and China’s SSE Composite, traded lower. US markets ended mostly in the red on Tuesday, and Wall Street futures indicated a negative opening, further pressuring investor mood.

2) Sticky US inflation data: US consumer prices rose 0.3 percent in June after a 0.1 percent increase in May, according to data released by the Bureau of Labor Statistics. The annual CPI jumped to 2.7 percent from 2.4 percent. The data reduced the likelihood of near-term rate cuts by the US Federal Reserve, which in turn weakened global risk sentiment, including in Indian equities.

3) Tariff-related uncertainty: Ongoing trade negotiations between India and the US have yet to result in a trade deal. "The market has been oscillating in a narrow range during the last two months. A breakout above 25,500 needs positive triggers, which could include a trade deal. But even then, a sustained rally is unlikely without earnings support," said VK Vijayakumar, Chief Investment Strategist, Geojit Financial Services.

4) Disappointing Q1 earnings: Weak earnings from large-cap IT firms such as TCS and HCL Technologies added to the pressure. TCS missed revenue estimates with a 3.3 percent quarter-on-quarter decline in constant currency terms. HCL Tech reported a 10 percent drop in net profit to Rs 3,843 crore, below market expectations.

"There are no signs of strong earnings support. Two major sectors – IT services and consumption, particularly FMCG – are struggling with tepid numbers," Vijayakumar added.

5) Crude oil prices rise: Brent crude gained 0.20 percent to USD 68.85 per barrel. Higher crude prices raise import costs and weigh on India’s trade balance, often impacting inflation and rupee stability.

6) Rupee under pressure: The rupee weakened by 22 paise to 85.98 against the US dollar in early trade amid rising crude prices and a decline in exports and imports.

Technical outlook

Anand James, Chief Market Strategist at Geojit Financial Services, said Nifty’s recovery attempt lost steam near 25,220. A sustained move above this level could trigger a rally towards 25,420. Until then, the index may remain range-bound with a downside bias towards 25,120 or 25,090. A break below 25,030 would be seen as a bearish signal, though a fall below 24,920 appears unlikely in the near term, he added.

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