Understanding the downturn: 5 factors driving Sensex and Nifty lower

The Indian equity markets witnessed significant volatility last week as both the key indices Sensex and Nifty closed the week in negative territory losing over 1%. Investors turned cautious amid heavy foreign fund outflows and economic concerns. Analysts have highlighted a few important factors contributing to the ongoing weakness.

A major trigger was the surge in foreign institutional selling over the past few trading sessions. Data shows overseas investors withdrew nearly ₹30,000 crores from domestic stocks in October so far. This heavy FII selling pressure unsettled market sentiment. Additionally, the recent guidelines from the market regulator SEBI to tighten equity derivative rules added to the downward pressure by raising compliance costs.

Geopolitical tensions and a rating downgrade for Indian equities also played a role. Market researcher BCA downgraded its view on Indian stocks from ‘neutral' to ‘underperform', citing overvaluation concerns and risks of slowing earnings growth. It recommended investors shift funds to relatively cheaper Chinese equities. Escalating crude oil prices further weighed on investor mood by threatening India's import bill and key sectors like oil & gas.

On the technical front, Nifty witnessed selling intensify after breaking below key support levels. The immediate support levels for the index are seen around 24,750 while resistances are pegged near 25,300. Bank Nifty finds near term cushion at 51,000 and upside limited by 52,500-53,000 zone. Overall, widespread weakness across global markets and multiple headwinds dragged domestic indices lower last week.