Sensex sinks 4,000 pts in 5 sessions amid ME tensions; investors' wealth eroded by ₹17 lakh cr

Indian stock market benchmarks, the Sensex and the Nifty 50, continued to witness selling pressure for the fifth straight session on Friday, triggered by escalating geopolitical tensions in the Middle-East and Chinese stimulus. The sentiment was further dented by sustained selling by foreign institutional investors, who pumped out nearly ₹32,000 crore from the Indian equity market in the last four sessions.

The BSE benchmark Sensex has lost 4,100 points in five sessions, eroding investors' wealth by around ₹17.28 lakh crore. The market capitalisation of BSE-listed companies slipped to ₹461.06 lakh crore, from ₹478.34 lakh crore at the end of trade on September 26, 2024.

In a similar trend, the NSE Nifty has fallen around 1,200 points in five trading days amid continued selling since September 26.

"The bearish sentiment continued as investors are monitoring 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+,” says Vinod Nair, Head of Research, Geojit Financial Services.

On Friday, the BSE Sensex dropped 808.65 points or 0.98% to settle at 81,688.45, and the NSE Nifty plummeted 235.50 points or 0.93% to end trade at 25,014.60 levels, after breaching 25k in intraday. On the BSE Sensex pack, 18 out of 30 stocks ended in the red zone. The top laggards on the BSE Sensex were Mahindra & Mahindra, Bajaj Finance, Nestle India, Hero MotoCorp, and Asian Paint, which fell in the range of 2.5% to 3.5%. On the other hand, Infosys, ONGC, HDFC Life Insurance Company, Tech Mahindra, and Wipro were among best performers, gaining up to 1.3%.

“The drag was across sectors led by realty, auto, and FMCG except IT stocks, which gained due to expected benefits from U.S. rate cuts and defensive nature. The pessimism on the market is expected to continue in the near term amidst rising crude prices and fund flows to cheaper markets like China," says Nair of Geojit Financial.

India Volatility Index (India VIX), which calculates stock market volatility in India using the Nifty 50 index, has witnessed a sharp volatility in the last one week, rising by 19% to 14.13 today. Several market analysts have attributed this sharp rise in the volatility index to the escalating conflict in the Middle East, which resulted in a spike in crude prices.

The weakness in the Indian stocks was in sync with global peers, with Asian markets ending mostly in red, while European shares edged lower in early trade.  In the overnight trade, U.S. markets ended a tad lower, with the Dow Jones Industrial Average, S&P 500, and Nasdaq Composite declining 0.08%, 0.17% and 0.04%, respectively.

Further consolidation on cards 

The market is expected to see further consolidation next week amid ongoing tensions in West Asia, while rate-sensitive stocks will be in focus amid the RBI policy meeting scheduled between October 7-9.

“We expect markets to consolidate next week amid cautiousness due to fear of increasing tensions in West Asia. With the start of the earning season next week, stock-specific action will continue. Also, the focus will remain on interest-sensitive stock amid the RBI policy meeting next week. Although rate cut is not on the table, commentary will hold great importance,” says Siddhartha Khemka, Head - Research, Wealth Management, Motilal Oswal Financial Services Ltd.

Ajit Mishra – SVP, Research, Religare Broking, opines that the ongoing geopolitical tensions have driven crude prices higher, dampening hopes for a rate cut by the RBI in the upcoming policy meeting. Additionally, noticeable selling by foreign investors is adding to the market's strain. “While there may be a pause or slight rebound after the recent slide, the overall bias will remain negative unless Nifty decisively reclaims the 25,600 level.”

“Key sectors such as IT, metal, and pharma are showing resilience, while others are facing selling pressure during rallies. Traders should adjust their positions accordingly and consider adopting a hedged approach,” adds Mishra.

Rajesh Bhosale, Equity Technical Analyst, Angel One, also expects further pain for the market, with the next key support for Nifty around 24,750-24,500 levels. “Volatility is expected to remain elevated, and traders should avoid unnecessary risks. It's also crucial to monitor global developments, as well as regulatory updates, which have been contributing to the recent market selloff.”

"The Nifty witnessed a bear attack for the second consecutive day. Sustained trades below key levels triggered a correction towards 25,000. The sentiment has turned extremely weak, with higher levels being used as selling zones. On the lower end, the next support is seen at 24,750, while on the higher end, resistance is visible at 25,300," says Rupak De, Senior Technical Analyst at LKP Securities.

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