Nifty, Sensex fall 1%; FII selling, firm US yields among factors weighing on sentiment

21,000 crucial support for Nifty, say analysts.

Benchmark indices the Sensex and the Nifty fell 1 percent each on January 25 afternoon amid mixed global cues. Analysts expect sideways consolidation as its the monthly F&O expiry day, with 21,000 acting as a crucial support for the Nifty.

On January 25, the Sensex slipped 1 percent to day's low of 70,324, while Nifty declined 0.9 percent to day's low of 21,247.

"The support for the Nifty is seen at 21,100, while resistance is placed at 21,400. However, any decisive breach below the psychological level of 21,000 shall weaken the overall trend and investors can anticipate further slide," said Vaishali Parekh, vice-president of technical research at Prabhudas Lilladher.

ALSO READ: Daily Voice | This market strategist says downside risk to HDFC Bank limited

Here are the factors pulling the market down:

FII selling 

The sideways consolidation is expected to continue in the next few sessions, said analysts as selling by foreign institutional investors (FIIs) during the week weighed on sentiment.

Foreign investors have net sold shares worth Rs 19,300 crore, so far, this month.

India Inc has reported Q3 results below Street expectations. Most banks, lead by sector heavyweight HDFC Bank, reported disappointing sets of numbers.

The volatility should be used by investors to rejig their portfolios, VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services said. Banking pockets were fairly valued and performance and prospects look good. "There is value in bluechips like HDFC Bank," he said.

High volatility 

India VIX, which measures volatility anticipated in the market, surged over 3 percent in morning deals to 15. Broader indices the Nifty Midcap 100 and the Nifty Smallcap 100 outperformed the benchmark, gaining 0.2 percent each within the first hour of trade.

Sectoral laggards: IT, banks

The Nifty IT index was the worst hit dragged by a 4 percent fall in Tech Mahindra shares after it posted a weak set of Q3 financials.

Analysts at HSBC shared a "hold" call on the counter, skeptical of company's turnaround in the near-term given a tough macro environment plagued by demand slowdown across verticals.

Bank Nifty, too, slipped in the red to 44,892 amid weakness in private sector lenders like Axis Bank, HDFC Bank, ICICI Bank, and Kotak Mahindra Bank, as investors continued to book profits due to margin worries and sluggish deposit growth lurking in the industry.

PSU lenders like Bank of Baroda and Punjab National Bank shares, however, bucked the trend, trading up to a percent higher.

Deven Mehata, Research Analyst, Choice Broking, said support for Bank Nifty was at 44,800 followed by 44,700 and 44,500. "If the index advances, 45,300 would be the initial key resistance, followed by 45,500 and 45,700," he added.

Firm treasury yields disappoint investors

Rising treasury yields also contributed to the weak sentiment. Overnight, the yield on the benchmark US 10-year Treasury note was up more than 3 points at 4.1 percent, while yield on the 2-year Treasury note rose more than 3 basis points to 4.38 percent.

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