The equity benchmarks Sensex and Nifty extended losses for the second straight day on Friday, as persistent selling by foreign institutional investors (FIIs) and weak global cues dented investor sentiment.
The Sensex tanked 465.75 points or 0.55 percent to settle at 83,938.71. During the day, it dropped 498.8 points or 0.59 percent to 83,905.66. The Nifty fell by 155.75 points or 0.6 per cent to 25,722.10.
However, equity benchmarks logged their biggest monthly gains in seven months in October as strong corporate earnings and reasonable valuations drew in foreign investors.
The Nifty 50 and the Sensex gained 4.5 percent and 4.6 percent in October, settling 2.1 percent and 2.4 percent below their all-time highs reached in September 2024.
NTPC, ETERNAL, Max Healthcare Institute, Cipla and InterGlobe Aviation were among the major laggards in the Nifty pack, declining up to 2 percent.
Key factors behind market decline
1) FII selling: FIIs offloaded equities worth Rs 3,077.59 crore on Thursday, marking the second consecutive session of net selling after pulling out Rs 2,540.16 crore on Wednesday. Analysts said the continuous withdrawal by overseas investors has turned market sentiment weak.
Dr. VK Vijayakumar, Chief Investment Strategist at Geojit Investments, noted that the "renewed selling by FIIs is likely to be a drag on the market in the near-term."
2) Weak global cues: Weak cues from Asian markets also weighed on domestic equities, with Shanghai’s SSE Composite Index and Hong Kong’s Hang Seng Index quoting lower. US markets ended in negative territory on Thursday.
"Global markets are trading mixed this Friday morning, reflecting investor caution after US indices closed lower overnight. Investors remain guarded as they assess the Federal Reserve’s latest policy signals and await upcoming economic data for clarity on the global outlook. Across Asia, the market tone is largely uneven, with investors treading cautiously ahead of the weekend amid lingering global volatility,” Ponmudi R, CEO, Enrich Money told PTI.
3) Lack of clarity on US-China trade deal: U.S. President Donald Trump and China's Xi Jinping concluded talks on Thursday at a South Korean air base with both leaders sounding optimistic about cooling trade tension between the world's two largest economies. However, analysts said it lacked a comprehensive agreement.
V.K. Vijayakumar, Chief Investment Strategist at Geojit Financial Services, said the outcome of the recent Trump-Xi summit offered only a one-year truce in the US-China trade dispute, rather than a comprehensive deal, leaving markets disappointed despite some relief from easing tensions.
4) Selling in bank shares: SEBI has notified new rules for Bank Nifty, including the requirement that the sectoral index should have minimum 14 constituents as against the current 12. Kotak Mahindra Bank, ICICI Bank and HDFC Bank were among the major laggards in the pack. The top three constituents (HDFC Bank, ICICI Bank, and SBI) will see a gradual weight reduction across four tranches, reported CNBC-Awaaz on October 31. The channel added that Yes Bank, Indian Bank, Union Bank and Bank of India could be four new candidates for inclusion.
SEBI notifies new rules for Bank Nifty
On the technical front, Anand James, Chief Market Strategist, Geojit Financial Services, said, "What was emerging as a bullish continuation pattern is now evolving into a topping formation. Yesterday’s dip extended to our downside marker of 25,886, pointing to underlying weakness. While some initial recovery is possible, upswings are likely to face resistance near 25,960, followed by further declines. A sustained move above 25,960 could delay or prevent a potential fall towards 25,700–25,400."
Disclaimer: The views and investment tips expressed by experts on Moneycontrol are their own and not those of the website or its management. Moneycontrol advises users to check with certified experts before taking any investment decisions.
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