Loss for 5th straight day; war fears drag Sensex and Nifty down 1%

 After an exceptionally volatile session, Indian benchmark indices ended Friday almost a perent lower, extending losses for the fifth straight session. This comes after an over 2 percent decline seen in the previous session.

The Sensex ended 808.65 points or 0.98 percent lower at 81,688.45 while the broader Nifty fell 200.25 points or 0.8 percent to 25,049.85

Overall the indices have ended the truncated September 30-October 4 week over 4 percent lower after three straight weeks of positive returns. Additionally, from their record highs scaled on September 27, the benchmarks have dropped over 5 percent.

The recent market downturn has been driven by escalating tensions in the Middle East, where the conflict between Iran and Israel has intensified. 

Several other factors apart from geopolitical concerns have contributed to the market crash, such as rising crude oil prices, regulatory changes in the F&O segment by SEBI, and outflows from foreign institutional investors (FIIs).

"The bearish sentiment continued as investors monitor the escalating conflict in the Middle East and have adopted a ‘sell-on recovery’ strategy. Crude prices have moved up sharply but may be restricted due to an increase in production from OPEC+. The drag was across sectors led by realty, auto, and FMCG except IT stocks, which gained due to expected benefits from US rate cuts and their defensive nature," said Vinod Nair of Geojit Financial Services.

Pessimism likely to continue

"The pessimism in the market is expected to continue in the near term amidst rising crude prices and fund flows to cheaper markets like China," Mr Nair added.

On Friday morning, the Sensex and the Nifty, started on a negative note falling half a percent in morning deals. However, the indices soon recovered almost 1.5 percent from their day's low as they witnessed lower-level buying. The Sensex then surged 1,295 points from the intraday low to reach a high of 83,347 while the broader Nifty rallied 378 points from its low to hit the day's high of 25,472.65.

But during the last leg of the trade, the indices again slipped into the red. The Sensex shed 1,835.64 points from the day's high to 81,532.68 while the Nifty tanked 518.25 points to its day's low of 24,966.8.

Impact of Iran-Israel war 

The situation worsened after Iran launched around 180 ballistic missiles at Israel, causing Brent crude prices to spike from $71 to $75 per barrel.

Fears are mounting that Israel could retaliate by targeting Iran's major oil fields, which would likely push oil prices even higher. This presents a significant concern for India, which imports 80 percent of its oil, including Iran. Any substantial increase in oil prices would raise India's import costs, adding more pressure to the country's economy.

Sectoral performance 

Broader markets mirrored the performance of the benchmarks, with the midcap and smallcap indices witnessing a volatile trade. The Nifty Midcap and Nifty Smallcap indices ended almost a percent lower in today's session.

Meanwhile, most sectoral indices also witnessed sharp falls. Nifty Media lost the most, down 2.53 percent followed by Nifty Realty, down 1.7 percent. Moreover, Nifty Auto, Nifty FMCG, and Nifty Oil and Gas were also down over 1 percent each. Meanwhile, Nifty Bank, Nifty Private Bank and Nifty Financial Services shed 0.5 percent, 0.53 percent and 0.9 percent, respectively. Nifty Metal and Nifty Pharma were also in the red. However, Nifty IT and Nifty PSU Bank were the only two indices in the green, up 0.45 percent and 0.61 percent, respectively.

On the stock-specific front, Infosys, Tata Motors, Tech Mahindra, Axis Bank, and TCS were the top gainers in the Sensex pack. Conversely, M&M, Bajaj Finance, Asian Paints, Nestle, and Bharti Airtel were the top losers.

Fundamental view

Siddhartha Khemka of Motilal Oswal Financial Services noted that domestic equities continued their downward trend, with Nifty breaching the 25,000 mark during intraday trading. 

Mr Khemka said the rise in the volatility index, selling by foreign institutional investors, and weak global cues contributed to the market's profit booking. The Nifty has now shed 1,310 points (-5.2%) after hitting a fresh high of 26,277 last week.

Looking forward, Mr Khemka expects the markets to consolidate next week amid caution stemming from concerns over escalating tensions in West Asia. "With the upcoming earnings season and the RBI policy meeting, stock-specific action is likely to continue. While a rate cut is not anticipated, the commentary from the RBI will hold significant importance, particularly for interest-sensitive stocks,” he said.

Technical view

Vaishali Parekh of Prabhudas Lilladher noted that the Nifty 50 index fell below the 25,300 mark, impacted by escalating geopolitical tensions in the Middle East. Sentiment has been hit hard, and she counsellled maintaining a cautious approach. In the near term, the index has support around the 50-EMA zone of 25,000, while the critical major support is at the 200-period moving average near the 23,100 level.

For the Bank Nifty, Ms Parekh observed that the index dipped below the key 50-EMA zone of 51,900, indicating a weakening bias. The near-term support is at 51,000, with crucial support at 49,600. A drop below this could worsen the situation. The daily range for the Bank Nifty is expected to be between 51,300 and 52,400 levels.

(By arrangement with livemint.com)