Dragged by losses in index heavyweights and IT and banking counters, the equity benchmark indices swung back to losing ways on Thursday ahead of the monthly F&O expiry later today. Weak earnings from Tech Mahindra weighed on tech stocks while banking stocks extended their slide as selling continued in HDFC Bank. BSE Sensex plunged 700 points to below sub-70,500 level while Nifty50 slipped below the 21,300 mark.
“The market seems to be navigating through a corridor of uncertainty, with our bias weighing more on weakness. Further bounce-backs are expected to be met with selling pressure. Immediate resistance is seen around 21550-21600, while Tuesday’s high at 21750 remains a pivotal level. On the downside, yesterday’s low around 21100 and the 50SMA around 21000 serve as immediate support before the market potentially heads lower in the near term,” said Samit Chavan of Angel One.
Key factors behind the Sensex crash today:
1. Losses in financial stocks weigh
Financial services, the heaviest weighted among the major sectors, dropped 0.55%. They have tumbled 6.2% since HDFC Bank reported disappointing margins last week. Axis Bank and HDFC Bank were among the top Sensex drag today as well.
2. IT stocks sour mood
Tech Mahindra shed 4% and was the top Nifty 50 loser after it posted a smaller-than-expected quarterly profit due to weak client spending. Its poor performance also rubbed off on other IT stocks in the indices. After banking, IT stocks have the highest weightage in benchmark indices.
3. Global markets subdued
Asian stocks traded cautiously and bonds fell on Thursday while investors waited on more detail of China’s stimulus plans and for a European Central Bank meeting later in the session. Japan’s Nikkei fell 0.3%, while the Hang Seng rose 1.2% and mainland indexes were steady.
S&P 500 futures were 0.1% lower in Asia, as were Nasdaq 100 futures, dragged by a 6% drop in Tesla shares after the bell following earnings that missed expectations and a warning of a sales slowdown ahead.
4. Rising bond yields
The rising bond yields in the US is a matter of concern for investors.
“This rally in global stock markets was triggered by the Fed pivot which saw the 10-year bond yield falling from 5% to around 3.8%. Now the 10-year is back at 4.18% which indicates that the Fed rate cut will come only in H2 of 2024,” V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services.
5. FIIs remain net seller
FIIs extended their selling streak to a sixth session on Wednesday. In the six sessions since, FIIs have sold Indian shares worth Rs 34,766 crore, which has pulled the benchmark Nifty 50 down about 3%. “Since the tug of war between the FIIs and DIIs continues, volatility will remain high in the near-term. This volatility may be used by investors to churn their portfolios,” said Dr. V K Vijayakumar of Geojit Financial Services.
6. Crude oil prices rise
Oil prices rose on Thursday after data showed U.S. crude stockpiles fell more than expected last week, while the Chinese central bank’s cut in banks’ reserve ratio reinforced hopes of more stimulus measures and economic recovery.
The March contract for Brent crude gained 25 cents, 0.31%, to $80.29 a barrel. U.S. West Texas Intermediate crude climbed 30 cents, or 0.4%, to $75.39 a barrel.
(With inputs from agencies)
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