Investors lose Rs 6 lakh crore in a day as Sensex, Nifty fall

The Sensex and the Nifty closed in negative territory for the third consecutive day, on Thursday. The Sensex closed with a loss of 495 points, or 0.61 percent, at 81,007, while the Nifty 50 ended 221 points, or 0.89 percent, lower at 24,749.85.

Shares of Nestle, Mahindra and Mahindra and UltraTech Cement closed as the top losers in the Sensex index. On the other hand, Infosys, Tech Mahindra, and Power Grid were the top gainers in the index.

The midcap and smallcap segments suffered deeper losses. The BSE Midcap index plunged 1.65 percent, while the BSE Smallcap index declined 1.42 percent.

The overall market capitalisation of firms listed on the BSE plunged to nearly ₹457.3 lakh crore from nearly ₹463.3 lakh crore in the previous session, making investors poorer by about ₹6 lakh crore in a day.

"Markets continued its downward trajectory despite firm US and European cues, as foreign fund selling coupled with a sharp fall in automobile stocks ahead of the final day's IPO subscription of Hyundai weighed on sentiment. As expensive valuations continue to bite, banking, realty, metals, and telecom shares also attracted significant profit-taking," said Prashanth Tapse of  Mehta Equities.

Barring Nifty IT, which rose 1.19 percent, all sectoral indices ended with losses, with Nifty Realty (down 3.76 percent), Auto (down 3.54 percent), Consumer Durables (down 2.20 percent) and Media (down 2.18 percent) ending with deep cuts.

Headwinds ganging up

The Nifty 50 has fallen about 1.5 percent in the last three sessions. The index is now down 6 percent from its all-time high of 26,277.35 which it hit on September 27 this year.

The recent market fall could be attributed to a confluence of several headwinds, including a fresh escalation of tensions in West Asia, strong foreign capital outflow after China's stimulus announcements, and unimpressive Q2 earnings so far.

The precarious situation in West Asia has led to volatile crude oil prices, leaving investors on edge. As India is one of the largest oil importers, fluctuating oil prices can negatively impact its fiscal maths and pressure the rupee.

Foreign capital outflow has been a key factor in the recent market downturn. In October, foreign portfolio investors (FPIs) sold Indian equities daily, with total sales amounting to ₹67,311 crore as of October 16.

Q2 earnings disappointing

Disappointing earnings in the September quarter have increased worries about the market's high valuations.

Good earnings are essential to support these valuations. Strong earnings growth justifies higher stock prices, keeps valuation measures like the P/E ratio balanced, and boosts investor confidence. Without strong earnings, it becomes hard to justify high valuations, putting stock prices at risk of falling.

"The domestic market experienced significant losses driven by widespread selloffs across various sectors. This downturn was attributed to weaker sales forecasts for the festive season, high NPAs (non-performing assets), and slow credit growth. Weak Q2 result is affecting the market sentiment," said Vinod Nair of Geojit Financial Services.

Outlook for Nifty: Weak sentiment likely to continue

According to Shrikant Chouhanof  Kotak Securities, the Nifty 50 has formed a bearish candle, and on intraday charts, it is holding a lower top formation.

"We are of the view that the market texture is weak, and as long as the Nifty 50 trades below 24,900, weak sentiment is likely to continue. On the downside, the index could slip to 24,550-24,500. On the flip side, above 24,825, we could see a one quick pullback rally to 24,850-24,900," said Mr Chouhan.

Rupak Deof  LKP Securities underscored that on the daily chart, the Nifty 50 has broken down from a bearish flag pattern, suggesting a possible downward move in the short term.

However, Mr De added that this might not be the ideal level to initiate short positions, as the index has experienced a steep correction and is near double-bottom support, which could trigger a near-term recovery toward 25,000.

Mr De said a decisive fall below 24,700 could lead to a significant correction in the market.

(By arrangement with livemint.com)