Bloodbath on D-Street: Sensex settles over 1,300 pts lower, Nifty ends near 23,850; four key factors behind market crash

Bloodbath on D-Street: Sensex crashes 1,150 pts, Nifty near 23,900; four key factors behind market decline

• Sensex and Nifty trade lower amid global uncertainty
• FIIs net sellers, DIIs net buyers; trend likely to continue
• Middle East tensions impact investor sentiment and market moves

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Benchmark indices Sensex and Nifty ended in deep red on March 11 amid the escalating Middle East war and choppy oil prices. Sensex fell over 1,300 points while Nifty ended below the psychologically important 23,900-mark.

On March 11, Sensex closed 1,342.27 points or 1.72% lower at 76,863.71, and the Nifty ended 394.75 points or 1.63% lower at 23,866.85. About 1,807 shares advanced, 2,277 shares declined, and 138 shares were unchanged.

Banking and automobile stocks were the major laggards. The Nifty 50 was weighed down by index heavyweight stocks HDFC Bank and Axis Bank, which were down 1.8% and 4.5%, respectively.

1. FII selling

On March 10, foreign institutional investors (FIIs) have continued to remain net sellers of Rs 4,673 crore, while domestic institutional investors (DIIs) did net buying of over Rs 6,333 crore.

"The FII vs DII game is back to the last one-year pattern of sustained selling by FIIs being more than matched by sustained buying by DIIs. Given the continuing indifference of FIIs towards India and the sustaining inflows into Indian equity mutual funds, this game is likely to continue in the near-term," said VK Vijayakumar, Chief Investment Strategist, Geojit Investments Limited.

2. Profit booking

In the previous session, benchmark indices ended higher after snapping a short losing streak, supported by broad-based buying and easing concerns over global risk factors. The Nifty 50 closed around 24,261 while the Sensex settled near 78,206, registering moderate gains amid improved investor sentiment. Sectorally, auto, financials, and consumer-oriented stocks led the recovery, while some pressure was seen in select IT and oil & gas counters.

The Nifty 50 was mainly dragged down by the fall in shares of automobile makers, banks, and other financial companies. Shares of Mahindra & Mahindra and Bajaj Finance were the worst hit, down 3-4%.

"There is still considerable geopolitical uncertainty and that is why markets are basically on edge," said Devarsh Vakil, head of Prime Research at HDFC Securities.

The smallcaps and midcaps dropped 0.4% and 1.3%, respectively.

Jio Financial Services, which rose 1.1%, was the top gainer in the Nifty 50 index. The stock rose after Motilal Oswal initiated coverage on it with a 'buy' recommendation. Pharmaceutical companies Sun Pharmaceutical Industries and Dr. Reddy's Laboratories ended nearly 1% higher each. State-owned energy companies Coal India, NTPC, and Oil and Natural Gas Corp. closed 0.6-1.6% higher. Shares of Coal India rose after the global brokerage Jefferies raised its target price by 8% to Rs 485.

Bajaj Finance and Axis Bank were the worst-hit stocks in the index, ending around 5% lower each. Shares of Bajaj Finserv, Shriram Finance, State Bank of India, and Kotak Mahindra Bank ended 2-4% lower. Automobile companies Mahindra & Mahindra, Bajaj Auto, Tata Motors Passenger Vehicles, Eicher Motors, and Maruti Suzuki India ended 3-4% lower as well. Shares of JSW Steel, Bharti Airtel, Tata Consumer Products, Trent, Asian Paints, Bharat Electronics, and Tata Consultancy Services closed 2–3% lower.

3.  Weak global cues

The United States and Israel traded air strikes with Iran on Tuesday, even as Trump said on Monday that the conflict could be "over soon."

"Volatility will likely persist as crude prices swing sharply and there is still no clarity on when the Middle East conflict will end, despite Trump's recent comments," said Sunny Agrawal, head of fundamental equity research at SBICAPS Securities.

Brent crude futures swung between gains and losses on Wednesday and were last trading up $3.52, or 4% higher, at $91.32 a barrel. Markets doubted whether the International Energy Agency's reported plan for a record release of oil reserves could offset potential supply shocks.

"Uncertainty around crude and gas...is keeping the market on edge, and stability will return only once there is clearer direction on the war and energy prices," Agrawal said.

The benchmarks have lost about 5% each since the start of the Iran war.

4. India VIX Rises

India VIX, the volatility gauge, rose over 8% on March 11 to trade at 20.5, which suggests Street is expecting a short-term volatility.

Technical View

"From a technical perspective, the Nifty continues to trade in a consolidation range, with immediate support placed near 24,100 followed by 24,000, while on the upside the index faces resistance in the 24,400–24,500 zone. A sustained move above these levels could open the path for further upside toward the 24,600–24,700 area, while failure to hold above support may trigger short-term volatility," said Aakash Shah, Technical Research Analyst, Choice Broking.