Sensex slides over 600 points: 4 factors behind stock market weakness

Stock market today: The S&P BSE Sensex was down 611.27 points to 78,063.91 at 1:42 pm, while the NSE Nifty50 declined 208.65 points to trade at 23,674.80.

In Short

• Sensex and Nifty plunge over 1%, extending monthly market losses
• FII outflows, weak earnings, and inflation data weigh on markets
• China stimulus diverts foreign inflows, hitting Indian equity markets hard

Benchmark stock market indices fell sharply on Wednesday, falling over 1% each as the mood on Dalal Street continues to remain tense.

The S&P BSE Sensex was down 611.27 points to 78,063.91 at 1:42 pm, while the NSE Nifty50 declined 208.65 points to trade at 23,674.80.

All other broader market indices were also trading in negative territory as volatility jumped sharply during the session.

It may be noted that the Sensex ended over 800 points in the previous session, while Nifty50 declined over 1%. In a month, the Sensex is down nearly 5% and Nifty50 is down nearly 6%.

KEY FACTORS BEHIND STOCK MARKET WEAKNESS

Analysts have attributed the weak run on Dalal Street to sustained FII outflows, weak Q2 earnings, retail inflation data and dampened hopes of interest rate cut by the Reserve Bank of India (RBI).

Santosh Meena, Head of Research, Swastika Investmart Ltd, said, “Nifty has experienced its first significant correction in terms of both time and price since March 2023. This sell-off was sparked by China’s new stimulus package, which has diverted FII flows from India to China.”

“Additionally, weaker-than-expected Q2 earnings from Indian companies, particularly in the consumption sector, have further intensified FII selling, leading to record outflows from Indian equities over the past month and a half,” he added.

He further said that these pressures are being aggravated by rising US bond yields and a strengthening Dollar index, both of which pose challenges for emerging markets like India. It is also worth mentioning that the rupee had hit a record low in early trade on Wednesday.

From a technical standpoint, Meena said, “Nifty is now trading near its 200-DMA and is heavily oversold, suggesting a potential temporary bottom around the 23,500 level. However, the 24,500 level will likely serve as a key resistance.”

“Given these conditions, a relief rally in Nifty and Bank Nifty appears possible, though Midcap and Smallcap indices may still face further downside risk,” he added.

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