Sensex falls 450 pts from day's high, Nifty below 23,150: Key factors behind market decline for 4th day

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

• Sensex and Nifty fell sharply after early gains on Monday.
• Rising crude prices and FII outflows dampened market sentiment.
• Geopolitical tensions in West Asia impacted equities and rupee.

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The benchmark equity indices Sensex and Nifty declined sharply from their day’s high on Monday as elevated crude oil prices amid prolonged tensions in West Asia and continued foreign fund outflows dampened investor sentiment.

The Sensex had jumped 419.37 points or 0.54 percent to 74,983.29 in early trade, while the broader Nifty rose 133.55 points or 0.57 percent to 23,284.65.

However, profit-booking emerged soon after, eroding early gains. By around 11:15 am, the Sensex was trading 28.03 points or 0.038 percent lower at 74,535.89. The Nifty was down to 23,148.10, down 3 points or 0.013 percent.

IDBI Bank declined more than 13 percent on ​reports said the government will shelve the ​bids it received for a majority stake sale in the lender. Bharat Electronics, Power Grid Corporation of India and Infosys were among the key laggards in the Nifty50 pack, declining up to 3 percent, while UltraTech Cement and Grasim Industries were among top gainers, rising up to 3 percent. Market breadth was negative as about 931 shares advanced, 2818 shares declined, and 168 shares unchanged.

The Nifty midcap100 and Nifty smallcap100 ​fell 0.59 percent and 1.18 percent, respectively.

The benchmark indices have shed nearly ⁠8 percent this month due to the U.S.-Israeli war on Iran, which led to ​closure of Strait of Hormuz.

Key factors behind market decline

1) Weak global cues: Asian markets were trading lower, with South Korea’s Kospi, Japan’s Nikkei 225 and China’s Shanghai SSE Composite index in the red. US markets had also settled lower on Friday.

2) Persistent FII outflows: Foreign institutional investors offloaded equities worth Rs 10,716.64 crore on Friday, adding pressure on domestic equities.

"The sustained FPI selling continued unabated in March. FPIs were net sellers on all trading days in March. The total FPI price selling through exchanges through 13th March stood at Rs 54,455 crores.

Dr. VK Vijayakumar, Chief Investment Strategista at Geojit Investments, said "the weakness in global equity markets following the war in West Asia, the steady depreciation of the rupee and concerns surrounding the impact of high crude price on India’s growth and corporate earnings contributed to the concern of FPIs. The poor returns from India vis a vis other markets - both developed and emerging- during the last eighteen months is the principal reason for FPI’s indifference towards India. If their sustained selling strategy is to change, there should be clear indications of earnings recovery in India. In the present uncertain context, this will take time. Now FPIs regard South Korea, Taiwan and China as better markets to invest since they are relatively cheaper than India even after the recent correction. Also, the corporate earnings prospects in these markets appear better than that of India. Therefore, further selling by FPIs in India is likely in the short term."

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3) Crude prices surge: Brent crude, the global oil benchmark, rose about 1 percent to USD 104.2 per barrel. Higher oil prices are negative for India, the world's ​third-largest crude importer, as they could widen the fiscal deficit, stoke inflation ​and weigh on growth.

4) Geopolitical concerns: Market direction through the week is expected to remain heavily influenced by geopolitical developments in West Asia and movements in crude oil prices. Hariprasad K, research analyst and founder at Livelong Wealth, said. "The ongoing tensions involving Iran, Israel and the US have disrupted energy markets and raised concerns over shipping routes through the Strait of Hormuz, keeping crude prices elevated and risk sentiment fragile."

5) Rupee declines: The rupee remained weak, slipping 13 paise to 92.43 against the US dollar, weighed down by heavy foreign fund outflows and higher crude prices amid geopolitical uncertainties. Forex traders said volatile sentiment in domestic equities also pressured the local currency even as the dollar retreated from higher levels. At the interbank foreign exchange market, the rupee opened at 92.44 and traded near its lowest-ever intra-day level.

Technical outlook

Anand James, chief market strategist at Geojit Investments, said the Nifty is currently positioned near the lower end of a channel that has held the downtrend since early March. "If 23,000 holds, we could expect a swing higher towards 23,600–23,990. Alternatively, failure to push above 23,330, or a direct fall below 22,900, could trigger a move towards 22,000," he said.

(With inputs from Reuters)

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