Sensex falls 732 points from day’s high to end 181 points lower; here’s why

Snapping three sessions gaining streak, Indian equities ended lower on Thursday amid profit booking at higher levels, while volatility on account to the weekly F&O expiry weighed on the market sentiments. Investors also turned cautious ahead of release of the RBI meeting minutes later today, followed by the Federal Reserve’s summer symposium in Jackson Hole tonight. Officials of the world’s most powerful central banks, including U.S. central bank, the European Central Bank, the Bank of England, and the Bank of Japan, are scheduled to meet in Jackson Hole, Wyoming, for their yearly conference on central banking.

Early today, the domestic bourses opened higher for the fourth straight session as market sentiment was lifted by the successful landing of Chandrayaan-3 on the Moon's southern pole as well as positive cues from global peers. In the early trade, the BSE Sensex gained as much as 480 points to hit an intraday high of 65,914, while the NSE Nifty rose 140 points to touch day’s high of 19,584 mark.

However, weakness in index heavyweights such as Reliance Industries (RIL) and its recently listed demerged entity, Jio Financial Services, as well as Power Grid Corporation, JSW Steel, Larsen & Toubro, and ONGC dragged benchmark Sensex 732 points lower from day's high to settle in the red. The Nifty50 also slipped 215 points from the session’s high levels.

Triggered by the sell-off in the last few hours of the session, both the benchmark indices ended 0.28% lower. While the 30-share Sensex closed 181 points lower at 65,252 levels, the Nifty50 settled at 19,387 marks, down by 57 points.

Bucking the trend, the broader markets ended marginally, with Midcap and Smallcap indices gaining 0.11% and 0.21%, respectively.

The top loser of the BSE Sensex pack was Jio Financial Services, which hit its 5% lower circuit for the fourth consecutive session. Jio parent, Reliance Industries, Power Grid Corporation of India, JSW Steel, Larsen & Toubro were among the top laggards, falling between 1-2%.

On the flip side, IndusInd Bank, Asian Paints, Infosys, UltraTech Cement, and Nestle India were among the top gainers, rising up to 2%.

On the sectoral front, healthcare and metal indices were among the worst performers, while IT and Teck indices saw some buying. The weakness in the metal space was led by index heavyweights such as Jindal Steel & Power, Hindalco Industries, JSW Steel, NMDC, and Coal India.

In the healthcare sector, Procter & Gamble Health, Max Healthcare Institute and Jubilant Pharmova were among top laggards.

Vinod Nair, Head of Research at Geojit Financial Services, says optimism in the domestic market was more visible in the IT sector, though sentiments were reversed in other major sectors, likely influenced by the prevailing global uncertainties. “Despite this, mid- and small-cap stocks demonstrated resilience, and the decline in bond yields facilitated a resurgence in foreign investor buying momentum,” he says.

Rupak De, Senior Technical analyst at LKP Securities, says, "The Nifty remained under the bear's grip as selling pressure emerged around the day's high, resulting in a decline below 19,500. On the upper side, resistance is expected to persist in the range of 19,450-19,500. A definitive breakout or a closing above 19,500 could potentially trigger a rally in the index. On the lower side, there is immediate support at 19300; a drop below this level might lead to panic in the market."

Analyst at Choice Broking says that the trading day encompassed a diverse range of outcomes, with the Nifty and Fin Nifty registering declines, while the Bank Nifty and Nifty Midcap managing to secure gains, resulting in a nuanced market landscape.

“Amidst these developments, it is worth highlighting the emergence of a significant Bearish Engulfing Candle pattern on the Nifty chart, indicating potential weaknesses ahead. This observation underscores the importance of a critical support level positioned at 19250; any breach below this juncture could potentially empower bearish sentiment and sway market control in their favour. Counteracting this notion is the existence of a substantial resistance level at 19,500, signifying a pivotal threshold for our market benchmarks,” says Ameya Ranadive CMT CFTe, Equity Research Analyst, Choice Broking.

Given the dynamic and evolving nature of the current market environment, Ranadive recommended investors to adopt a cautious approach, focusing their attention on individual stocks within the Nifty Midcap and Nifty Smallcap segments. These particular categories are presently showcasing robust strength, potentially offering promising avenues for investment, he adds.

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