Sensex falls 700 pts, Nifty below 25,150: Selling in IT stocks among key factors behind market decline

Sensex, Nifty see profit-booking in July 11 trade. 

The benchmark stock indices Sensex and Nifty settled lower on Friday for the third session in a row amid heavy selling in IT shares following the Q1 earnings announcement of Tata Consultancy Services (TCS), while uncertainty over the India-US trade deal also weighed on investor sentiment.

Sensex tanked 689.81 points or 0.83 percent to settle at 82,500.47. During the day, it fell 748.03 points or 0.89 percent to 82,442.25. Similarly, the Nifty dropped 205.40 points or 0.81 per cent to 25,149.85.

TCS, Wipro, Mahindra & Mahindra, Bharat Electronics and Apollo Hospitals Enterprise were among the major laggards, declining up to 2.5 percent.

Following are the key factors behind Friday's market decline

1) IT Stocks Under Pressure: Shares of TCS dropped over 2.5 percent after the company reported its June quarter results. The IT major posted a 6 percent rise in net profit to Rs 12,760 crore, aided by higher non-core income, while revenue growth remained muted. The company’s rupee revenue rose 1.3 percent to Rs 63,437 crore, but declined over 3 percent in constant currency terms due to market headwinds and the winding down of the BSNL deal.

The Nifty IT index fell as much as 1.5 percent, with all 10 constituents trading in the red.

"Q1 results of TCS indicate continuing struggle for IT companies, particularly large-cap IT. However, midcap IT is likely to do well," said VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services.

Stock Market LIVE Updates

2) Trade Deal Uncertainty: Investors remained cautious over the India-US trade agreement. A team from the commerce ministry is expected to travel to Washington for further discussions on the proposed bilateral trade agreement. The US has extended the suspension of additional duties on Indian goods till August 1, keeping markets on edge.

India, US extend deadline for trade deal to July 31st: Report

3) Weak Global Cues: US stock futures traded in the red after President Donald Trump said on Thursday the US would impose a 35 percent tariff on imports from Canada and planned broader tariffs of 15 to 20 percent on other trading partners. Although Wall Street ended higher on Thursday, the tariff remarks raised concerns globally.

Trump imposes 35% tariff on Canadian imports starting August 1; blames trade retaliation and Fentanyl crisis

4) Rise in Crude Oil Prices: Brent crude futures climbed 0.35 percent to $68.88 a barrel after President Trump hinted at possible action on Russia, raising fears of fresh sanctions. Higher crude prices are negative for India, a major oil importer.

5) Trump-Fed Rift: US President Donald Trump reiterated his call for the Federal Reserve to slash interest rates by at least three percentage points, arguing it would help reduce debt servicing costs. A perceived weak Federal Reserve chairman, seen as succumbing to political pressure, can erode market confidence in the central bank’s independence and lead to policy decisions that may not align with economic fundamentals, impacting financial stability.

6) Rise in India VIX: The fear gauge or the India Vix rose up to 2 percent to the levels of 11.87, indicating heightened volatility in the domestic markets amid earnings season and a pending trade deal with the United States.

Technical View

Anand James, Chief Market Strategist at Geojit Financial Services, said, “With upside attempts having faced pressure through the week, the range expansion that was lying in the waiting appears to be unfolding on the lower side, having slipped below 25,440 yesterday. Our upside hopes now rest on the chances of downsides getting limited to the 25,220 region, setting up a flag pattern followed by a sharp rise. Else, expect 25,025–24,920.”

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