Explained: Why Sensex nosedived 1,000 points today

Stock market today: For now, analysts recommend cautious optimism as the Indian market grapples with global pressures and internal headwinds, while awaiting signs of stabilization in the months to come.

In Short

• Sensex has declined 8,000 points from its 52-week high
• Technical charts suggest Nifty near support but resistance looms
• FII outflows, retail inflation and weak Q2 results disrupt momentum

Benchmark indices in India experienced sharp declines on Wednesday as the ongoing FII sell-off and weak corporate earnings continue to weigh heavily on Dalal Street.

The S&P BSE Sensex dropped 1,065.31 points to 77,609.87 by 3:03 pm, while the NSE Nifty50 tumbled 334.78 points to 23,548.65, marking yet another session of substantial losses.

Here are the biggest factors that have triggered the bloodbath on Dalal Street:

FII SELLOFF WORSENS

The current market slump is largely driven by foreign institutional investors (FIIs) withdrawing substantial amounts from Indian equities, a trend that began in October.

Since then, FIIs have pulled out a record Rs 1.2 lakh crore, spurred by factors like the surging dollar index and rising US bond yields, which are attracting capital away from emerging markets.

Dr. VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services, remarked, “With US 10-year bond yields reaching 4.42%, more outflows are expected from emerging markets, posing a consistent headwind for India.”

TECHNICAL OUTLOOK CONCERNS

On the technical front, analysts note that the Nifty is trading near its 200-day moving average (DMA), appearing oversold, which suggests a temporary bottom could be near the 23,500 mark. However, key resistance around 24,500 may cap any relief rally. Santosh Meena from Swastika Investmart commented, “While a relief rally in Nifty and Bank Nifty is possible, Midcap and Smallcap indices may still face further downside risk.”

For now, analysts recommend cautious optimism as the Indian market grapples with global pressures and internal headwinds, while awaiting signs of stabilization in the months to come.

RETAIL INFLATION WORRIES

Another factor that has hurt sentiments on Dalal Street is the sharp rise in retail inflation in October. Retail inflation rose to 6.21% last month, reaching a 14-month-high. This has dampened the hope of a potential rate cut this year, with the Reserve Bank of India (RBI) back on the drawing board in terms of controlling inflation.

(Disclaimer: The views, opinions, recommendations, and suggestions expressed by experts/brokerages in this article are their own and do not reflect the views of the India Today Group. It is advisable to consult a qualified broker or financial advisor before making any actual investment or trading choices.)