Markets snap 2-day rally as Nifty closes below 23,100, Sensex sheds 300 pts; small, midcaps crack up to 2.5%

Sensex sheds 760 pts from day's high, Nifty below 23,200 in see-saw trade; IT, FMCG gain as broader markets crack 2%

The equity benchmarks witnessed sell-off on the last trading session of the week with the Sensex and Nifty declining nearly half a percent on Friday after a two-day rally.

The indices witnessed volatile swings during the day with the BSE benchmark Sensex declining 329.92 points or 0.43 percent to settle at 76,190.46. During the day, it slumped 428.63 points or 0.56 percent to 76,091.75. The NSE Nifty declined 113.15 points or 0.49 percent to 23,092.20.

While Nifty maintained a firm upward momentum in the early trade, supported by a sharp uptick in IT stocks, however, the gains proved short-lived as profit-booking took hold, particularly in mid- and small-cap stocks.

HUL, Britannia, Eicher Motors, Grasim and Tata Consumer Products were the top Nifty gainers in today's trading session, while Dr. Reddys Laboratories Ltd, Trent, Adani Enterprises, M&M and BPCL were the top losers on the Nifty.

Broader Markets Bear the Brunt

While IT and FMCG indices managed to stay in the green, the broader market faced significant pressure. The Nifty Smallcap 100 fell by 2.63 percent during today's session, while the Nifty Midcap 100 declined up to 1.8 percent, erasing a substantial portion of the gains recorded in the previous sessions.

Market observers pointed to heightened volatility and concerns over quarterly earnings and sustained FII selling as key drivers of the sell-off in broader indices.

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IT and FMCG Shine Bright

The Nifty IT index ended in green for the third straight session, led by gains in stocks like MphasiS, Wipro and Persistent Systems, rising up to 4 percent. Analysts attributed the rally to robust quarterly earnings and attractive valuations in the tech space, which have drawn sustained investor interest.

The FMCG index also fared well, buoyed by stocks such as Hindustan Unilever, Britannia Industries and Tata Consumer Products, climbing over 2 percent.

Ajit Mishra – SVP, Research, Religare Broking Ltd. noted that this movement in the index aligns with expectations. "We anticipate further downside pressure in the coming sessions towards the 22,700-22,900 zone in Nifty. However, the greater concern lies in the pronounced selling in the midcap and smallcap segments, which is unlikely to ease in the near term. On a positive note, select pockets across sectors are showing signs of resilience and could emerge as potential outperformers during the next phase of recovery. For now, participants are advised to align their positions with the prevailing trend and avoid adding to losing trades," he noted.

Sectoral Weakness Persists

On the downside, Nifty Pharma, realty, auto, and banking indices were among the worst performers. The pharma sector, in particular, came under pressure following mixed brokerage reviews of Dr Reddy's Laboratories’ third-quarter results. Analysts noted that a subdued Q3 performance had clouded the stock's near-term outlook, prompting cautious sentiment among investors.

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