The stock market on Tuesday ended in red as NSE benchmark Nifty50 closed at 23,883.45 with a drop of 257.85 points or 1.07 per cent. Sensex also traced a similar path ending at 78,675.18 with a decline of 820.97 points or 1.03 per cent.
The early market presented a ray of hope as benchmark indices saw a jump during the session, with the BSE benchmark Sensex climbing 324.83 points to 79,820.98 in early trade NSE Nifty 100.7 points up, soaring to 24,242.
However, the optimism was short-lived as the market gradually lost momentum throughout the day. As the closing bell approached, both indices had reversed their gains, ending lower by more than 1 percent.
Among Sensex’s 30 share pack Infosys, Sun Pharma, ICICI Bank, TCS, and Reliance were the top gainers, contributing to the index’s early strength while it was weighed down by losses in NTPC, HDFC Bank, Asian Paints, SBI, and Tata Motors.
Dalal Street has been witnessing a downward trend because of strong selling due to foreign fund outflows and weak global signals.
Relentless FII selling
According to exchange data, on Monday foreign institutional investors (FIIs) sold equities worth Rs 2,306.88 crore, while domestic institutional investors (DIIs) bought shares worth Rs 2,026.63 crore.
VK Vijayakumar, Chief Investment Strategist, Geojit Financial Services, said, “Two strong factors have been at play in this consolidating market. One, the relentless selling by FIIs has been favoring the bears and pulling the market down. Two, the sustained buying by DIIs has been supporting the market preventing a crash in the market. How the market will trend in the coming days will depend on the relative strength of these two factors.”
Markets are expected to be volatile under pressure until foreign flows revert. This foreign flow is also fueled by policies that will be formed and implemented under Donald Trump, US president-elect, as US markets are currently benefiting from strong economic growth.
Disappointing Q2 results and regulations
Markets are also undergoing a sluggish transition as investors are responding to disappointing results for the second quarter of companies. Along with the Q2 performances, new regulations introduced by the reserve bank of India have also impacted the trading.
Shriram Subramanian, Founder and MD of InGovern Research Services, elaborated, “Asian Paints, as expected, tanked considerably due to its lackluster performance. The upcoming F&O regulation changes, which restrict expiry to a monthly basis starting November, have also made traders cautious.”
VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services, said that in India below expectation results for this fiscal year are weighing down on stock prices favoring a downward market. He also expressed that low stock prices may become attractive again, leading to a reversal in the market trends.
“However, at some point, India’s valuations will become attractive, potentially triggering a short-term trend reversal,” he said.
Donald Trump’s return
A research report by the State Bank of India states that with Donald Trump returning to power for a second term, India’s foreign direct investment (FDI) sector could experience changes. The report highlighted that FDI inflows to India were affected by the major regulatory changes Trump implemented during his first term to attract investment into the US.
It also pointed out that if similar policies return during his second term, it could create significant challenges for emerging markets like India, which rely heavily on FDI for their economic growth.
Vinod Nair, Head of Research at Geojit Financial Services, revealed that the recent rise in the value of the dollar, driven by aggressive “Trumponomics,” is raising concerns among investors.
The rupee has been on a downward trend since Trump’s return, marking its all-time low of 84.40 against the US Dollar on Tuesday. It is expected to depreciate further by 8-10 percent.
(With inputs from agencies)