The benchmark equity indices declined sharply on Friday, dragged by weak earnings from Axis Bank, continued foreign fund outflows and negative global cues.
Sensex tanked 501.51 points or 0.61 percent to settle at 81,757.73. During the day, it shed 651.11 points or 0.79 percent to hit a low of 81,608.13. The Nifty dropped 143.05 points or 0.57 percent to close at 24,968.40.
Axis Bank, SBI Life Insurance Company, Shriram Finance , HDFC Life Insurance Company and Kotak Mahindra Bank were among the major laggards, declining up to 6 percent intraday.
1) Axis Bank Earnings Disappoint: Shares of Axis Bank plunged over 6 percent after the lender reported a 3 percent drop in consolidated net profit at Rs 6,243.72 crore in the June quarter. The results were impacted by a change in its classification of non-performing assets and loan upgrade policy.
"Axis Bank’s numbers missed expectations. Its GDR fell 4.8 percent to USD 64.30 on Thursday, reflecting deterioration in asset quality," said Devarsh Vakil, Head of Prime Research, HDFC Securities.
The weak performance dragged down the Nifty Bank index by over 1 percent, with 11 of its 12 constituents trading in the red. Disappointing earnings from large-cap IT firms such as TCS and HCLTech also dampened market sentiment.
"The initial set of earnings has largely been muted and that is showing in the market reaction," Arun Malhotra, fund manager at CapGrow Capital told Reuters.
2) FII Selling Continues: Foreign Institutional Investors (FIIs) offloaded shares worth Rs 3,694.31 crore on Thursday, extending the selling trend seen through July.
"India has underperformed global peers so far this month. The selling by FIIs is a major factor. They were sellers in the first quarter, turned buyers in the next, but have resumed selling in July," said VK Vijayakumar, Chief Investment Strategist, Geojit Financial Services.
3) Global Cues: Weak trends in Asian equities also weighed on Indian markets. Key indices in Japan and South Korea were trading in the red.
4) Rise in Volatility Index: India VIX, a measure of market volatility, rose nearly 4 percent to 11.62, indicating rising nervousness among investors.
Technical View
Anand James, Chief Market Strategist at Geojit Financial Services, said the Nifty's slide extended to the 25,120–25,090 region, a key support zone.
“A direct fall below 24,920 could open the door for further downsides. On the upside, the index may face resistance around 25,150–25,265,” James noted.
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