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In a volatile session On Monday, the BSE Sensex crashed up to 962 points or 1.17 per cent to 80,726.06 levels, while NSE’s Nifty50 fell 244 points or 0.97 per cent at 24,770 levels in intraday deals. The bourses, however, opened in green this morning but erased the gains shortly after, slipping deep in red.
The benchmarks retreated amid continued weakness exhibited by the bourses, on account of an ongoing war between Israel and Iran and heavy selling by foreign investors eyeing cheaper markets such as those of China and Hong Kong.
The index heavyweights that pulled the BSE Sensex down on Monday in terms of contribution included HDFC Bank, Reliance Industries, NTPC, Axis Bank and Larsen and Toubro. Among these, NTPC fell the sharpest, plummeting up to 4 per cent, while Adani Ports was the top loser on Sensex, also down 4 per cent intraday.
Among sectoral trends, all sectors were trading in red, except Nifty IT soaring 0.47 per cent intraday, with Nifty Metal slipping the second lowest (down 2.44 per cent) after Nifty Media that fell over 3 per cent intraday. Metal stocks such as National Aluminium, APL Apollo Tubes, Hindalco, NMDC, Adani Enterprises, Hindustan Zinc, Hindustan Copper, SAIL, and Welspun Corp fell in the range of 3-6 per cent intraday.
Other sectors such as Nifty PSU Bank, Private bank, Financial Services, Consumer Durables and Oil and Gas among others also dipped over 1-2 per cent each intraday.
The broader markets bled heavier than benchmarks, with the BSE SmallCap index falling 3.86 per cent at 53,784.53 level, while the BSE MidCap index slumped 2.61 per cent to 46,653.6 intraday.
Historically analysts said that smallcaps underperform benchmarks every three years, but the last five years have been different, where the index showed continued performance alongside the benchmarks. However, a reversal of this trend is visible now, said G Chokalingam, founder & CEO Equinomics Research Pvt Ltd.
“After every two-three years of rally, small cap stocks tend to become overvalued, leading to corrections and underperformance. This pattern has been evident in past cycles, and we’re seeing it unfold again now,” said Chokalingam.
He also clarified that while looking ahead, he anticipates that small and mid caps will underperform relative to large caps for at least the next three to six months. This is consistent with historical trends and logical market behaviour.
“The correction we are witnessing is largely due to the overvaluation in the market. The ongoing war serves as a trigger, but it was only a matter of time before the market adjusted itself,” Chokalingam added.
Apart from the ongoing war FIIs have also become heavy sellers of Indian stocks, with with the Nifty declining 4.5 per cent in last week.
“This sharp correction has been mainly triggered by the massive FII selling in the cash market which reached Rs 40,509 crores during the last four days. Leading large caps like RIL, HDFC bank and ICICI bank which are major holdings in the AUM of FIIs bore the brunt of the FII onslaught. This correction is an opportunity for long-term investors since the valuations of these stocks are fair and prospects look good. DIIs flush with funds will continue to buy the beaten down quality stocks,” said Dr V K Vijayakumar, Chief Investment Strategist, Geojit Financial Services.
Technical View
According to technical analysts, the Nifty 50 Index is experiencing a downward trend in the near term. However, the index is approaching a strong support zone at 24,800, where traders and investors should start looking for opportunities to accumulate positions.
This level is expected to provide a solid base for a potential rebound, particularly for short-term traders. Below 24,800, the index may enter an oversold zone, extending down to 24,400.
“These levels present a significant buying opportunity, as a bounce is expected once the index reaches these support zones. On the upside, resistance is expected at 25,150, 25,375, and 25,800,” said Ravi Nathani, an independent market analyst.
Global markets
The pullback in Indian equities also comes amid a strong show by Asian peers, with Japan’s Nikkie rising 1.80 per cent, and broad based Topix 1.68 per cent. South Korea’s Kospi also jumped by 1.58 per cent, while Australia’s ASX/200 was up 0.68 per cent. In Hong Kong, the Hang Seng index increased by 1.60 per cent.
Before the Mainland Chinese markets went for a week long holiday till October 7, China’s CSI 300 rose 8.48 per cent on September 30, 2024. The Chinese markets will now open for trading on Tuesday, October 8.
First Published: Oct 07 2024 | 2:25 PM IST
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