Sensex has crashed over 4,100 points in just five trading sessions as the double blow of the Iran-Israel war and China’s stimulus package has unleashed a bear attack on the Indian stock market, leaving investors poorer by Rs 16 lakh crore.
The Indian markets have witnessed strong volatility in today’s session, swinging between gains and losses. The benchmark indices plunged nearly 1 per cent in the final hour of trade, amid worries about escalating conflict in the Middle East. Banking, FMCG, and auto stocks bore the brunt of the sell-off, while IT stocks offered a brief glimmer of hope amidst the market turmoil.
The Friday Story Of Wild Swings
Early Trade: While the benchmarks started on a negative note with the Sensex, which had dropped over 2 per cent in the previous session, opened lower and fell half a percent in morning deals.
Miday: The equity benchmark indices then recovered almost 1.5 per cent from their day’s low in Friday’s trade as they witnessed buying action after four straight sessions of losses. The Sensex surged 1,295 points from its day’s low to reach a high of 83,347 while the broader Nifty rallied 378 points from its low to hit the day’s high of 25,472.65.
Fag-End: But by the last leg of the trade, the Indian indices again turned red. The Sensex shed 1,622 points from the day’s high while the Nifty tanked 481 points to its day’s low of 25,002.5 around 2:15 pm.
What Is Spooking The D-Street?
Institutional investors had already warned of peak valuations in what appeared to be an overheated bull market. The Chinese stimulus measures accelerated the outflow of FII money from India to China, where stocks were trading at much cheaper valuations.
And after Iran launched almost 200 ballistic missiles toward Israel on Tuesday in response to the Israeli air strike in the southern suburbs of Beirut last Friday, foreign investors became doubly cautious in emerging markets.
“The last three days have witnessed huge FII selling of Rs 30,614 crores in the cash market. FIIs are moving money from expensive India to cheap Hong Kong on expectations that the monetary and fiscal stimulus being implemented by the Chinese authorities will stimulate the Chinese economy and improve earnings of Chinese companies,” said V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services.
In the broader market, BSE small- and mid-cap indices slipped 1 percent. The India VIX, a key measure of market volatility, surged over 9 percent to 14.4.
Most sectoral indices were in the red. Nifty Realty lost the most, down 2.3 percent while Nifty Media, Nifty Auto, Nifty Financial Services, and Nifty Oil and Gas were also down over 1 per cent each. Meanwhile, Nifty Bank, Nifty Metal, Nifty Pharma, and Nifty Private Bank also shed over half a percent each. However, Nifty IT and Nifty PSU Bank were the only 2 indices in the green, up 0.33 percent and 0.44 percent, respectively.
On the Nifty 50, Cipla, Bajaj Finance, M&M, Hero MotoCorp, and Nestle took the hardest hit, dropping 2-4 percent. In contrast, Infosys, Tech Mahindra, Wipro, Axis Bank, and ONGC emerged as top gainers, climbing 0.5-1.5 percent.
Technical View
Vaishali Parekh, Vice President of Technical Research at Prabhudas Lilladher, noted that the Nifty 50 index fell below the 25,300 mark, impacted by escalating geopolitical tensions in the Middle East. Sentiment has been hit hard, and she advised maintaining a cautious approach. In the near term, the index has support around the 50-EMA zone of 25,000, while the critical major support is at the 200-period moving average near the 23,100 level.
For Bank Nifty, Parekh observed that the index dipped below the key 50-EMA zone of 51,900, indicating a weakening bias. The near-term support is at 51,000, with crucial support at 49,600. A drop below this could worsen the situation. The daily range for Bank Nifty is expected to be between 51,300 and 52,400 levels.
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