Indian equities sustained their downward trajectory for the sixth consecutive session, influenced by weak global indicators and the monthly expiry of derivatives contracts. Heightened geopolitical tensions in West Asia and US Treasury yields hovering around 5 percent created a sense of uncertainty in the global market. The impact of mixed second-quarter results, consistent sell-offs from foreign investors, surging crude oil prices, and a depreciating rupee further dampened market sentiment.
The selling pressure intensified on Thursday, primarily driven by volatility related to contract expirations, prompting investors to exercise caution. The Nifty index, a benchmark 50-share indicator, slipped below the psychological 19,000 mark, reaching levels last observed in June, closing at 18,857, marking a 1.39 percent decline.
In tandem, the Sensex plummeted by 900 points, or 1.41 percent, settling at 63,148.
Leading the downturn was M&M, the top Nifty loser, experiencing a 4 percent drop, trailed closely by Bajaj, UPL, and Asian Paints, which all experienced declines of over 3 percent. All sectoral indices ended in negative territory, with financials, automobiles, IT, and metals bearing the brunt.
Fertilizer company shares also suffered losses following the government’s reduction in subsidies for the upcoming rabi season.
Analysts expressed concerns about the simmering conflict in West Asia, economic uncertainty, and apprehensions regarding potential rate hikes. Shrikant Chouhan, Head of Equity Research (Retail) at Kotak Securities, pointed out the bearish signals in daily charts, indicating the possibility of further weakness in the market.
Foreign portfolio investors withdrew ₹7,702 crore on Thursday, while domestic institutions infused ₹6,558 crore, according to provisional data. In October alone, FPIs sold shares worth $1.7 billion, following the $1.8 billion sold the previous month.
Vinod Nair, Head of Research at Geojit Financial Services, noted that domestic Q2 results fell below expectations, mirroring similar disappointments in developed economies. He anticipated further earnings downgrades due to the economic slowdown caused by geopolitical conflicts and elevated interest rates.
The negative sentiment spread globally, with Asian stocks reaching 11-month lows, particularly Japan’s Nikkei 225 and South Korea’s Kospi indices, which slipped over 2 percent. The Shanghai Composite was the only index to close in the green, rising by 0.5 percent.
European shares also suffered, impacted by rising US Treasury yields, weak earnings reports, and upcoming events such as an ECB meeting and the release of US GDP numbers. Poor corporate results in the US further weighed on market sentiment.
Analysts predict that the Nifty’s weak sentiment may persist until it reaches levels around 18800-18725. A potential relief rally is anticipated only if the psychological barrier of 19,000 is breached.
Siddhartha Khemka, Head of Retail Research at Motilal Oswal Financial Services, advised long-term investors to consider the higher volatility as an opportunity to accumulate quality stocks at lower levels, emphasizing the wisdom of a higher allocation towards large caps given their comfortable valuations and steady growth prospects