`Sell on rise' sentiment grips Indian stock market

The Indian market ended on a lacklustre note on Monday, as the gains in IT and bank stocks were offset by losses in index heavyweights. 

Despite starting the day in negative territory, both the Nifty 50 and Sensex gained nearly 1% in the first half of the session. However, the market was gripped by a "sell on rise" sentiment, causing both indices to close lower. Investors seem to be using any uptick as an opportunity to sell, with sentiment remaining subdued due to concerns over softening Q2 earnings and other domestic factors. (A "sell on rise" strategy is a trading tactic that involves selling positions when prices reach expected resistance levels. The strategy is based on the idea that a rise in price could be a bull trap, meaning it's unlikely that the market will move substantially higher in the short term.)

The IT and banking sectors helped support a recovery in the market, but selling in heavyweights such as Reliance Industries, Asian Paints, and Bharti Airtel weighed on the overall market rebound.

Consequently, the Nifty closed Monday's session with a decline of 0.03%, settling at 24,141. The  Sensex closed 52.51 points, or 0.07%, lower at 79,433.

Significant selling pressure

In contrast, the broader market continues to face significant selling pressure, driven by the overheated valuations of mid- and small-cap stocks. The Nifty Midcap 100 index declined by 0.88%, closing at 55,853, while the Nifty Smallcap 100 index dropped 1.22%, finishing at 18,219 compared to the previous session’s closing level.

The recent correction in Indian stocks has been primarily driven by domestic factors rather than global developments. Key concerns include the expectation that inflation will remain elevated in the coming months, a slowdown in high-frequency indicators, weak spending by urban India, the rupee hitting record lows, and elevated market valuations.

There are growing concerns that the Reserve Bank of India may keep interest rates at higher levels until February, adding further pressure on market sentiment. 

Among the sectoral indices today, Nifty IT extended its winning streak for the second consecutive session on a strong US dollar, closing with a 1.28% gain, followed by Nifty Bank, which rose by 0.61%. On the other hand, Nifty Media fell by 1.3%, while Nifty Metal, Nifty Pharma, Nifty Oil & Gas, and Nifty Consumer Durables all ended with losses ranging from 0.65% to 1%.

Inflation is a major concern

Commenting on today's market performance Vinod Nair of Geojit Financial Services said, “The actions of FIIs are dominating the current market momentum, which is backed by a weak set of earnings and expectations from Trump policy. The risk of further downgrades in Nifty earnings casts clouds over investor sentiment, while the IT sector continued to outperform due to the strong US dollar and in anticipation of a revamp in US IT spending.”

“India is also looking forward to the CPI data with a muted view as food prices are likely to be higher on an MoM basis, essentially forging RBI to hold the interest rates in the short-term,” he  added.

A total of 27 Nifty 50 stocks ended today’s session in the red, with Asian Paints being the biggest loser. The company’s weak performance in Q2FY25 triggered a sharp sell-off, resulting in an 8.17% fall in the stock to ₹2,543, its lowest level since April 2021. Britannia Industries followed closely, tumbling 5.4% ahead of its Q2FY25 results. Other stocks such as Apollo Hospitals, Cipla, ONGC, JSW Steel, Tata Steel, and eight others ended the session with losses exceeding 1%.

On the positive side, Power Grid Corporation gained 4.3% after reporting strong Q2 numbers. Trent rebounded with a 2.9% gain following five consecutive days of losses as Goldman Sachs initiated coverage on the stock with a ‘Buy’ rating.

IT stocks, including Infosys, HCL Technologies, and Tech Mahindra, all ended the session with gains of over 1.4%. Auto stocks such as Maruti Suzuki India, Eicher Motors, and Bajaj Auto finished with gains of up to 0.80%.

(By arrangement with livemint.com)