The benchmark equity indices gave up early gains on Friday, with the Sensex dropping 700 points from its day’s high and the Nifty slipping below the 24,650 level, as investors booked profits amid weakness in IT shares and a rise in market volatility.
Sensex, which climbed 318.55 points to 81,036.56 in early trade following GST rate cut announcements and firm global cues, retreated to 80,353. The broader Nifty fell to 24,633 after breaching the 24,700 mark.
ITC, TCS, Infosys, Nestle and ICICI Bank were among the major laggards, declining up to 2.4 percent.
Key factors for the market reversal
1) IT stocks under pressure: Shares of information technology firms fell tup to 1.5 percent after initial gains of 0.5 percent. Weak US labour data raised concerns over economic growth in the world’s largest market for Indian IT services. Jobs data due later in the day is expected to show the slowest pace of hiring since the pandemic, with rising costs and policy uncertainties adding to pressures on the US economy.
2) Profit-booking at higher levels: After two sessions of gains, investors booked profits, weighing on the benchmark indices.
3) Rise in volatility index: India VIX, the market’s volatility gauge, rose 2.4 percent to 11.12. A higher VIX indicates increased uncertainty among investors, often leading to selling pressure.
Technical Analysis
Nifty ended the previous session at 24,734, up 19 points, forming a sizable bearish candle on the daily chart, signalling resistance near the 25,000 level. Importantly, the index continues to hold above the 20-day SMA at 24,699, keeping the broader trend intact, noted Axis Securities.
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