Where will Sensex and Nifty go after today’s market crash? The focus now turns to global cues, the upcoming Budget, and Q3 results.
The Indian equity markets faced a significant downturn today, with the Sensex plummeting over 1,000 points and the Nifty dropping by 1.5 percent. This has raised concerns about the market’s stability in the near future. Various global and domestic factors are contributing to this downward trend, including a strong dollar, high crude oil prices, overvalued stocks, and weak earnings projections. Analysts anticipate increased volatility in the coming days due to upcoming events such as the Union Budget, corporate earnings reports, and global inflation data.
On Monday, the BSE Sensex experienced a sharp decline of 1,049 points, closing at 76,330, while the NSE Nifty fell by 346 points to settle at 23,086. This marked the fourth consecutive day of losses, pushing the Nifty to its lowest level in seven months. The broader market indices were hit hard, with mid- and small-cap stocks each losing over 4 percent, resulting in a total market capitalization loss of more than Rs 12.39 lakh crore.
The market downturn was primarily driven by global events, such as the release of stronger-than-expected US jobs data last Friday, which dashed hopes of immediate rate cuts by the Federal Reserve. This led to a surge in US bond yields and the dollar index, impacting emerging markets like India. Additionally, crude oil prices reached a 15-week high due to new US sanctions on Russian oil, further exacerbating inflation concerns.
Domestically, the Indian rupee hit a record low of Rs 86.59 against the dollar, while the 10-year bond yield rose by 7 basis points to 6.85 percent. The negative sentiment was compounded by continuous selling by foreign portfolio investors (FPIs), who offloaded another Rs 4,900 crore in Indian equities today, adding to the Rs 20,000 crore sold so far in January.
What’s on the horizon for Sensex and Nifty?
In the near term, global factors are expected to play a significant role in shaping market trends. Market participants are closely watching the US Producer Price Index (PPI) data, set to be released tomorrow, as it could impact Federal Reserve policy expectations. Satish Chandra Aluri from Lemonn Markets Desk noted that globally, markets are adjusting to the possibility of fewer or no rate cuts in 2025, given the strong economic momentum in the US.
On the domestic front, upcoming events such as the Union Budget and Q3 corporate earnings season will be crucial. Vinod Nair, Head of Research at Geojit Financial Services, highlighted concerns over recent GDP downgrades and slowing earnings amidst high valuations. The Budget, RBI policy, and Q3 results will play a key role in determining the short-term market direction.
From a technical perspective, the Nifty’s recent close below key support levels, including the November 2024 low of 23,263, suggests further downside potential. Analysts anticipate the index to test levels between 22,900–22,800 in the near future, with immediate resistance at 23,260. Hrishikesh Yedve, AVP – Derivatives Research at Asit C Mehta Investment Intermediates, recommended a sell-on-rise strategy given the weak trend.
The Bank Nifty is also facing pressure, having closed below its 250-day simple moving average (DSMA) at 48,041. Analysts warn that the index could drop to its next key support level at 47,300.
The broader markets are experiencing stress, particularly in mid- and small-cap indices. The Nifty Smallcap 100 has plummeted by 10 percent over the past four sessions, losing 15 percent from its December 2024 all-time high in just 22 trading days. Nandish Shah, Deputy VP at HDFC Securities, attributed this extreme.
Sectoral Outlook: IT and Pharma Show Resilience
Despite a broad-based selloff in the market, certain sectors such as IT, FMCG, and select pharma stocks have shown resilience. On the other hand, realty, metals, consumer durables, and media stocks have borne the brunt of the correction.
Investors are advised to proceed with caution and selectivity in their strategies.
Analysts recommend a cautious approach due to increased volatility, with the India VIX rising by 7.25 percent to 16 today. Ajit Mishra, Senior Vice President of Research at Religare Broking Ltd., suggests that participants focus on risk management and seek out stock-specific opportunities in stable sectors like IT and pharma. Mishra also advises against overexposure to high-beta segments.
For more market insights, follow our blog.
Stay tuned for more updates and insights on the stock market! For more insights on investing in the Indian stock market, check out resource like ET, NSE India.
Disclaimer: This blog post is for informational purposes only and should not be considered financial advice. Investors should conduct thorough research and consult with a qualified financial advisor before making any investment decisions.