Hit by negative global cues amid a sharp selloff across AI technology stocks, India’s equity market came under pressure on Tuesday with the benchmark indices – BSE Sensex and NSE Nifty50 – sliding more than 1% each. At close, the Nifty50 declined 1.16% to settle at 23,824, while the Sensex fell 1.16% to close at 76,200.
Selling in Indian equities on Tuesday intensified after Korea’s Kospi plunged about 10%, and trading was briefly suspended after a steep decline in chipmakers SK Hynix and Samsung Electronics. The two stocks witnessed profit booking over stretched valuation concerns after a prolonged rally. The mood worsened when US futures fell as much as 2.5%, pointing to a weak open on Wall Street.
“The Indian equity benchmark indices witnessed a sharp sell-off and closed significantly lower, tracking weakness across Asian markets. Investor sentiment turned cautious after South Korea's KOSPI triggered a circuit breaker, leading to a 20-minute trading halt as the index plunged nearly 9% amid profit booking following its recent record rally, which had been driven by strong gains in semiconductor stocks and robust foreign inflows,” Sunny Agrawal, Head - Fundamental Research at SBI SECURITIES.
Sectorally, investors dumped metal stocks, with the Nifty Metal index plunging over 3%, followed by the Nifty IT and Nifty PSU Bank indices, which declined 2.2% and 2.0%, respectively. IT stocks remained under pressure, with the Nifty IT index declining after brokerages including Jefferies and Morgan Stanley flagged softer demand trends following a weaker-than-expected outlook from Accenture.
In the broader market, the Nifty Midcap 100 fell 1.05% while the Nifty Smallcap 100 declined by 0.48%. The sharp selloff across categories wiped out investors’ wealth by Rs 6 lakh crore as the overall market capitalisation of BSE-listed firms fell to Rs 475 lakh crore from Rs 480.6 lakh crore in the previous session.
Siddhartha Khemka - Head of Research, Wealth Management, Motilal Oswal Financial Services said that Indian equities are expected to trade sideways with a marginal negative bias in the near term amid weak global cues, continued Foreign Institutional Investor (FII) outflows, and uncertainty surrounding the proposed US-Iran ceasefire.
“Profit booking emerged after the Nifty had rallied ~4.1%, over the previous seven sessions, supported by lower crude oil prices and moderation in foreign outflows following measures aimed at supporting the rupee…Rising expectations of a potential U.S. rate hike this year also weighed on sentiment,” added Khemka.
A weak monsoon and its impact on rural demand also weighed on sentiment. Vinod Nair, Head of Research, Geojit Investments said that while stable crude prices and easing geopolitical tensions offered some support, investors maintained a cautious stance, focusing on the progress of the monsoon and ongoing US-India trade discussions.
Meanwhile, SpaceX shares closed 16.4% lower on Monday, the biggest single-day decline for the newly debuted stock, following a 3.6% drop on Thursday (US markets were closed on Friday for the Juneteenth national holiday) and a 5% drop on Wednesday. SpaceX’s stock has sunk more than 31% since hitting a peak of $225.64 on June 16, and its valuation has come down to around $2trillion from a high of $2.99trillion.