Sensex ends 906 pts lower, Nifty below 22K; midcap, smallcap indices crack up to 5%

The Indian equity market saw sharp selling on Wednesday, with benchmark indices BSE Sensex and NSE Nifty falling up to 1.5% in intraday trade, undermining firm cues from global peers. Investors were unfazed by stronger-than-anticipated U.S. inflation data as SEBI concerns over the froth building up in the smallcap and midcap space rattled the broader market.

The S&P BSE Sensex plunged 906 points, or 1.23%, to close at 72,762 levels, while the Nifty50 slipped below the crucial 22,000 mark to settle at 21,998, down 338 points, or 1.5%. In the broader market, the BSE Midcap index fell 4.2%, while the BSE Smallcap index cracked 5.11%.

Rupak De, Senior Technical Analyst, LKP Securities says the Nifty has experienced a breakdown from a rising channel on the daily chart, signaling the conclusion of the previous uptrend and the potential beginning of a downtrend. Additionally, the index has descended below the recent consolidation phase on the daily timeframe, further emphasising the increasing weakness, he adds.

“The Relative Strength Index (RSI) with a period of 14 is showing a bearish crossover and has dropped below the 50 mark. In the short term, the index may continue to be susceptible to selling pressure with resistance anticipated around 22,250. On the downside, support levels are positioned at 21,800 and 21,700," De says.

Early today, the 30-share Sensex opened higher at 73,993 against the previous closing price of 73,668, but soon lost momentum and plunged more than 1,500 points to hit an intraday low of 72,515, eroding investors’ wealth by more than ₹14 lakh crore as the market valuation of total BSE-listed companies falling to ₹371.69 lakh crore from ₹385.64 lakh crore at the end of previous session.

"In contrast to the global uptrend, unfavourable risk-reward balance of mid and small-cap stocks, fuelled by prolonged premium valuations, has aggravated the downfall. Meanwhile, FMCG and contrarian plays like gold are offering some refuge. Other than the premium valuation no fundamental issue is noticed to drawback the long-term growth image of domestic midcaps,” says Vinod Nair, Head of Research, Geojit Financial Services.

Among the 30 constituents of Sensex, barring ITC, ICICI Bank, Kotak Mahindra Bank, Bajaj Finance, and HDFC Bank, all heavyweights ended in negative terrain. The top losers of the BSE Sensex pack were Power Grid Corporation of India, NTPC, Tata Steel, Tata Motors, and JSW Steel, falling in the range of 3-7%.

On the other hand, ITC was the top performer with 4.5% gain, driven by strong volume. Among others, shares of ICICI Bank, Kotak Mahindra Bank, Bajaj Finance, and HDFC Bank ended flat with marginal gains.

On the sectoral front, all indices ended in the red zone, led by power and PSU index, which fell up to 6%.

Rahul Sharma, Head Technical and Derivatives Research, JM Financial Services, says that largecap stocks have joined the correction in smallcaps and midcaps which have been under severe selling pressure in the last few days. “Nifty has a derivatives support at 22,000 so any sustenance below the same should be taken as an indication of caution for longs. The only silver lining today has been in select private banks and FMCG stocks which have held their ground amidst a market-wide selloff."

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