Source : INDIA TODAY NEWS
The sell-off on Dalal Street showed little sign of letting up on Tuesday. After ending the previous session at a six-week low, Indian benchmark indices opened lower again as investors remained cautious about rising crude oil prices, the risk of a wider Middle East conflict and expectations of a US rate hike.
IT stocks remained a major drag, while the market’s broader picture showed a sharp divide between large-caps and select pockets of mid- and small-cap stocks.
At 9:29 am, the BSE Sensex was down 401.85 points, or 0.53%, at 75,730.96. The index opened at 75,970.28 against Monday’s close of 76,132.81, touched an early high of 76,012.11 and fell to a low of 75,721.82.
The Nifty 50 was down 108.15 points, or 0.45%, at 23,671. It opened at 23,743.10, touched a high of 23,758.95 and slipped to a low of 23,669.20.
The broader market was also in the red, although losses were more contained. Nifty 100 fell 0.38%, Nifty 200 declined 0.34% and Nifty 500 slipped 0.32%. Nifty Midcap 50 fell 0.23%, while Nifty Midcap 100 declined 0.18%. Nifty Smallcap 100 was down 0.24%.
India VIX, the market’s volatility gauge, rose 1.52% to 11.33, indicating some increase in investor nervousness.
CRUDE OIL NEARS $98 AS MIDDLE EAST TENSIONS ESCALATE
The biggest external concern for Indian equities remains crude oil.
Brent crude futures were trading at $97.50 a barrel, up 0.52%, while WTI crude was at $92.90, up 1.55%.
Crude prices have remained elevated as the conflict in the Middle East threatens to widen. Iran has warned that any fresh attacks on Tehran would be met with retaliation against US assets, while energy infrastructure across the Gulf, including US oil and gas interests, could be vulnerable.
The concern for India is straightforward: higher crude prices increase the country’s import bill and can put pressure on inflation and growth if the rise is sustained.
The Nifty Oil & Gas index was down 0.32% in early trade. The weakness was also visible across several large-cap stocks, with Reliance Industries down 0.76%.
IT STOCKS REMAIN A MAJOR DRAG
IT stocks continued to weigh on the market after stronger-than-expected US jobs data increased expectations of a September rate hike by the US Federal Reserve.
The Nifty IT index fell 0.76% in early trade. Infosys declined 0.46%, HCL Technologies fell 0.67% and Tech Mahindra slipped 0.73%. The Nifty MidSmall IT & Telecom index was also down 0.45%.
The concern is particularly important for Indian IT companies because a large part of their business comes from the US. Higher interest rates can make companies more cautious about spending, including on technology and discretionary projects.
The renewed pressure on IT comes after the sector was already hit in the previous session by expectations of tighter US monetary policy.
MARKET IN FIFTH WEEK OF DOWNTREND
The weakness is also part of a longer-running trend rather than a one-day correction.
Dr V K Vijayakumar, Chief Investment Strategist at Geojit Investments Limited, said the market has now entered its fifth week of a slow decline, with multiple factors weighing on sentiment.
“The market is now in the fifth week of a slow but steady downtrend. Elevated crude prices, selling in IT stocks, fears of a Fed rate hike this month and a booming IPO market which is sucking lots of money have contributed to this slow grind down in the market,” Vijayakumar said.
He said the macro factors behind the decline have not changed, meaning the weakness could continue in the near term.
“Since the macro construct which contributed to this downtrend persists, it is possible that the downtrend may continue in the near-term,” he said.
While the benchmark indices and large-cap stocks remained under pressure, there were pockets of strength in the broader market.
Nifty Pharma gained 0.22%, while Nifty Metal rose 0.35%. Nifty MidSmall Healthcare gained 0.03% and Nifty Chemicals was up 0.03%.
Among the major sectoral indices, Nifty Auto fell 0.44%, Nifty Financial Services 25/50 declined 0.46%, Nifty FMCG fell 0.14% and Nifty Realty dropped 1.04%.
Nifty Private Bank declined 0.41%, Nifty PSU Bank fell 0.22% and Nifty Healthcare was down 0.22%. Nifty Consumer Durables declined 0.27%.
The divergence is particularly visible in the broader market. While mid-cap indices are marginally lower, some stocks and sectors are attracting buying on earnings expectations.
Vijayakumar said this is creating an opportunity in large-caps, which have remained weak despite improving fundamentals.
“But this trend is opening up opportunities for investors in large-caps which continue to remain weak despite improving fundamentals,” he said.
One reason, according to Vijayakumar, is where domestic SIP money is currently flowing.
“A major factor contributing to the weakness of the large-caps despite their attractive valuations is that bulk of the steady monthly SIP inflows are going to the mid-and small-cap segments despite their elevated valuations,” he said.
He believes a reversal in this trend could eventually help large-cap stocks.
“A reversion to mean is overdue in the mid-and small-cap segments. This can facilitate a rally in fundamentally sound large-caps,” Vijayakumar said.
However, the timing of such a shift remains difficult to predict.
IPO BOOM CONTINUES TO ABSORB LIQUIDITY
Another domestic factor keeping pressure on the secondary market is the ongoing IPO boom.
Large IPOs are drawing investor money at a time when the secondary market is already dealing with global uncertainty. Vijayakumar expects this dynamic to continue until the major upcoming issues are completed.
“The timing of this transition is hard to predict. But this is likely by this month-end when the mega IPOs of NSE and Jio are completed and refunds from the IPOs come back to investors,” he said.
The return of IPO refunds could potentially release some liquidity back into the secondary market later this month.
BEL, ADANI PORTS AMONG FEW GAINERS
Among the major stocks, BEL was the top gainer, rising 1.11%. Eternal gained 0.28%, Adani Ports rose 0.24%, Bajaj Finserv gained 0.07% and Tata Steel was up 0.03%.
On the other side, Trent was the biggest loser, falling 1.28%. M&M declined 1.26%, Sun Pharma fell 1.12%, Axis Bank declined 0.87%, TCS fell 0.79% and Reliance Industries dropped 0.76%.
Maruti fell 0.75%, Bharti Airtel declined 0.74%, Tech Mahindra lost 0.73%, ICICI Bank fell 0.71% and HCL Technologies declined 0.67%.
IndiGo fell 0.63%, UltraTech Cement declined 0.57%, Bajaj Finance dropped 0.55% and HDFC Bank fell 0.53%.
For now, the market remains caught between strong domestic fundamentals and a difficult global environment.
Crude oil prices near $98 a barrel, developments in the Middle East and the US Federal Reserve’s rate outlook will remain key factors for large-cap stocks and the benchmark indices. At the same time, the IPO pipeline and continued SIP flows into mid- and small-caps are influencing how liquidity is distributed across the market.
Vijayakumar said investors may want to look beyond trying to predict the exact market bottom and instead consider portfolio allocation.
“Instead of trying to time the market, investors can think about changing the weightage of portfolios towards large-caps where the risk-reward is favourable,” he said.
For Dalal Street, the key question now is whether the fifth week of the downtrend brings another leg of selling or whether attractive large-cap valuations and the return of IPO liquidity later this month can help the market stabilise.
(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.)
– Ends
advertisement
SOURCE :- TIMES OF INDIA
