The domestic benchmark indices BSE Sensex and NSE Nifty50 continued losing streak for the sixth straight session on Thursday, mirroring weakness in global peers triggered by a combination of economics and geopolitics uncertainties. The concerns about rising U.S. Treasury yields and ongoing conflict in the Middle-East continue to be a major headwind for markets. The benchmark U.S. 10-year Treasury yields continue to hover around 16-year high of 5% briefly touched on Monday as investors' appetite for riskier assets such as equities, currencies, and commodities faded amid gloomy global economic outlook.
Investors have lost a whopping ₹18 lakh crore in the last six sessions, with the BSE Sensex falling as much as 3,300 points during the same period. In a similar trend, the NSE Nifty declined 960 in the last six trading sessions. The overall market capitalisation (mcap) of the firms listed on BSE dropped to about ₹305.6 lakh crore from ₹323.8 lakh crore on October 17, resulting in investors’ wealth erosion of ₹18.2 lakh crore in six sessions.
On Thursday, the BSE Sensex extended fall and tumbled as much as 929 points or 1.45% to hit an intraday low of 63,119, while the Nifty50 lost 273 points to touch day’s low of 18,849.
The broader market also witnessed selling pressure in line with the benchmark index, with BSE Midcap and Smallcap indices falling 2.2% and 2.9%, respectively, during the day’s trade so far.
The top losers on the BSE Sensex pack were Mahindra and Mahindra, Bajaj Finance, Tech Mahindra, Nestle India, and Titan Company, falling in the range of 2-4%. Most of the Sensex constituents were flashing in red, barring a few such as Axis Bank, HCL Technologies, ITC, IndusInd Bank, and Hindustan Unilever.
On the sectoral front, all indices were floating in negative terrain, led by realty and healthcare sectors. The realty index was the worst performer with a 1.8% loss, followed by a 1.6% fall in the healthcare space, while the FMCG sector witnessed the least selling, albeit it remained in the red zone.
What lies ahead for market?
According to V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services, the Israel-Hamas conflict continues to be a major headwind for markets. “If the conflict lingers for long it has the potential to impact global growth, too, when the global economy is already in the midst of a slowdown. In the near-term, however, the strongest headwind for the market is the stubbornly high US bond yields. With the 10-year bond yield at near 5% FPIs are likely to be in the sell mode.”
Vijayakumar further says that sectors like banking and IT which constitute the largest segments of the AUM of foreign portfolio investors (FPIs) are likely to be under pressure. “This will provide opportunities for long-term investors to buy quality stocks, particularly in banking, at attractive rates," he adds.
Analysts at Choice Broking says that the forthcoming monthly October expiry holds substantial importance, as today's closing figures will be instrumental in charting the course ahead. Presently, the short-term trajectory for Nifty remains pessimistic.
“Given the prevailing bearish sentiments in both indices, market participants are advised to exercise prudence and adopt a discerning, stock-specific approach in their investment strategies,” says Ameya Ranadive, Research Analyst at Choice Broking.
Mukesh Kochar, National Head of Wealth at AUM Capital, says, “The market was looking for some reason to correct as the valuation was not comfortable and finally, that correction happened. The main reason for correction can be attributed to the worsening of geo-political tension, rising U.S. yield and profit booking before the upcoming election.”
Kochar adds that foreign institutional investors (FIIs) have also increased their pace of selling and that might continue in the short term until rates pick out there. “Long-term investors do not need to do much and the only thing they can do is to add on in dip and stay with quality. The market may look reasonable in terms of the valuation if it corrects 300-400 points more from here and geo-political risk stablises although no one can predict the top or bottom in the short term,” he says.
Technical outlook
According to analysts at ICICI Securities, the Nifty50 index continued to inch southward as intraday pullback were short lived. Further, selling pressure accelerated on the breach of August low of 19,223. The daily price action resulted into a bear candle carrying lower high low, indicating extended correction.
“The key resistance is placed at 19,550 as it is current week’s high coincided with 50 days EMA placed at 19,590,” it says in a report.
The report highlights that the midcap index has logged a breakdown from 6 weeks consolidation while the smallcap index retreated from 15 years resistance trend line drawn adjoining CY07-21 high, indicating profit booking after around 50% rally seen during Mar-Oct 2023 amid overbought conditions (monthly stochastic is hovering at 88).
“The formation of lower peak and trough amid global volatility makes us revise the support base downward for the Nifty at 18,900-18,800 zone as it is confluence of 200 days EMA is placed at 18,826 coincided with 38.2% retracement of Mar-Sept rally (16,828-20,222), at 18,925 and previous swing high of 18,887 would now act as key support as per change of polarity concept,” the report notes.
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