NEW DELHI: India’s equity market is under deep selling pressure today with benchmark indexes- BSE Sensex and NSE Nifty - falling up to 2% each in the first half of the trading session. At 12.05, the Sensex was down over 1400 points and was trading under the 71,700 level while Nifty50 was down 386 points to trade below the 21,670 level.
The market was dragged down by bank stocks with the index heavyweight HDFC Banks plummeting more than 7% after its Q3FY24 results. Analysts noted that the lender’s stagnant margins for a second consecutive quarter in October-December is a negative for shareholders.
Shares of Kotak Mahindra Bank, Tata Steel, ICICI Banks and Axis Bank were down by about 3% each.
The global equity market was also under a selling spree after a key Federal Reserve official said that the US central bank should not rush to lower rates, lowering expectations of early rate cuts. High valuation concerns regarding the Indian market also crept in, prompting investors to book profit following a three-month rally.
"Market is likely to turn slightly weak in the near-term, getting impacted by some negative global and domestic cues. The global negativity will come from the rising bond yields in the US (the 10-year yield is at 4.04 %) responding to concerns that the sharp rate cuts expected from the Fed this year may not materialise,” said V K Vijayakumar, Chief Investment Strategist, Geojit Financial Services.
“Now indications are that the Fed is unlikely to cut in March and the total cuts in 2024 may not be five or six that the market had partly discounted. This will be a drag on global equity markets.
Domestically, even though the economy is doing well and corporate earnings are good, all these positives are in the price and the valuations are elevated warranting a correction. The mid and small-cap space is highly overvalued and is sustained at high levels only by the high liquidity in the system. Some profit booking and moving the money to fixed income can be considered now,” added Vijayakumar.
Santosh Meena, Head of Research, Swastika Investmart said that PSU Banks are outperforming in a weak market as they have valuation comfort as well as a tailwind in bullish momentum in the PSU space.
“Most of the PSU banks are likely to post a strong set of earnings. I believe their outperformance is likely to continue where Bank of India is my top pick in small PSU banks, while SBI from large-cap names should also catch up the momentum,” added Meena.
“If we talk about the overall market, then 21650–21500 is a key demand zone for the Nifty. Until buy-on-dip texture is continued, while below 21500, we can expect short-term weakness towards the 21000–20800 zone,” said Meena.