NEW DELHI: Domestic equity market benchmarks BSE Sensex and NSE Nifty50 closed in the red for the third straight session.
Analysts believe in the absence of any major positive trigger, the benchmarks may fall further if they go below certain support levels. The FIIs’ relentless selling of local equities is also weighing down heavily on investors’ sentiments.
After shedding over 2% each on Wednesday, Sensex closed 313.90 points or 0.44% lower at 71,186.86, Nifty fell 109.70 points or 0.51% to settle at 21,462.30.
Vinod Nair, head of research, Geojit Financial, said based on initial Q3 results, corporate earnings growth doesn’t align with the market’s high valuation. He adds that while figures aren’t bad, they are insufficient to sustain the prevailing euphoria. “Simultaneously, FIIs are exercising caution on emerging markets, considering the possibility that the Fed may not implement rate cuts as aggressively in CY24 as initially forecasted. Investors should adopt a cautious approach in the short to medium term,” said Nair. The foreign institutional investors (FIIs) sold shares (net) worth Rs 20,000 crores on Wednesday and Thursday. On Wednesday, the FII sell-off was the highest in 5 years.
Mehul Kothari, DVP, technical research, Anand Rathi Shares and Stock Brokers, said markets have been overbought and were in search for a trigger for profit booking which HDFCBANK provided them.
“We expect further correction only if today’s low of 21,285 is breached in Nifty since any positive trigger from other private bank might revive the sentiments. In case of recovery 21700-21800 might be real test for the bulls,” said Kothari.
As HDFC Bank share cracked 11% in two sessions following the Q3FY24 earnings, other private bank shares are seeing selling pressure. Coupled with Fed’s hawkish stance on rate cuts, impacting other global equity markets, Indian market’s dream run of two-and-half months seems to have run its course. In the medium to long term, analysts remain confident about India’s growth story. Betting big on rate cuts and cash inflow into equities, Emkay Institutional Equities predicted Nifty index to climb 11% by December 2024.
“We believe the Fed would cut in 3QCY24 and RBI would follow suit almost immediately. This would drive a re-rating in the markets which would be visible more in SMIDs (small and mid caps) than the Nifty. A BJP win in the Apr-May national elections is almost a done deal and focus is on FY25 budget. We also see possibility of a recovery in mass spending,” said analysts at Emkay.