NEW DELHI: Following three weeks of a bull run, India’s equity market corrected sharply on Friday with the benchmark indices - BSE Sensex and NSE Nifty - crashing more than 1 per cent each.
BSE Sensex closed 1,017 points or 1.24 per cent lower at 81,183 levels while the Nifty shut shop at 293 points or 1.17 per cent lower at 24,852 levels. Investors lost a whopping Rs 5.31 lakh crore as the market capitalisation came down to Rs 460.37 lakh crore on Friday against Rs 465.68 lakh crore in the previous session.
The fall is attributed to the nervousness ahead of the release of the US job data report as this would give clarity on the state of the world’s largest economy and its willingness to go for an interest rate cut in the near future.
Further, profit booking at record high levels also took place due to the SEBI's deadline over foreign institutional investors (FIIs) disclosure norm.
Vishnu Kant Upadhyay, AVP of Research and Advisory at Master Capital Services said that Investors are opting to stay on the sidelines, holding cash in anticipation of the US jobs report’s release.
“This decline is primarily attributed to concerns over a potential slowdown in the US labour market, following the ADP nonfarm employment report, which revealed that private businesses added only 99,000 jobs in August, significantly below the forecasted 144,000. Market participants are now awaiting the official nonfarm payrolls report from the Bureau of Labor Statistics, expected later today,” added Upadhyay
Additionally, nervousness in banking stocks has surfaced ahead of the release of loan and deposit growth data. Notably, Nifty50 has fallen below the critical 25,000 mark, prompting put writers to cover their short positions, exacerbating the market downturn, he said.
According to Vinod Nair, Head of Research, Geojit Financial Services, The domestic market was in a panic today due to the SEBI's deadline over FIIs disclosure norm, however, this is not expected to impact India’s lucrativeness to FIIs in the long-term.
Coupled with a lack of new market catalysts and elevated valuations, a muted trend is expected to continue in the short term. Additionally, the continuous decline in oil prices to a 14-month low and weak job openings data are heightening fears of a slowdown in the US in the near term, stated Nair.
In the Nifty 50 pack, 43 constituents ended in red. Lending major SBI fell 4.4 per cent after Goldman Sachs trimmed its rating on the public sector bank to ‘sell’ from earlier 'neutral' and also reduced its target price to Rs 742 apiece from an earlier price target of Rs 841 apiece.
The global brokerage believes that SBI faces multiple headwinds ahead as its Returns on Assets (ROA) peaks and the brokerage anticipates a valuation de-rating for India's largest lender.
Market breadth was in the favour of bears with 1403 stocks ending higher against 2544 stocks falling on BSE. 87 shares were unchanged. In the broader market Nifty Midcap and Smallcap fell 1.59 per cent and 1.25 per cent each respectively. The volatility index, INDIA VIX, surged by 12.97 per cent weekly, settling at 15.13, signalling a rise in market volatility.
Hrishikesh Yedve, AVP Technical and Derivatives Research at Asit C. Mehta Investment Intermediates said that the Nifty index broke the 25,000-25,100 support zone on Friday, forming a bearish engulfing candle on the weekly scale.
“On the daily chart, Nifty closed below its 21-day Exponential Moving Average (DEMA), indicating further weakness. The next major support is near 24,480, where the 50-DEMA is positioned. In the short term, any bounce should be seen as an opportunity to book profits,” added Yedve.