The Sensex and Nifty have dropped 10% from peaks on September 27, resulting in the indices entering the technical corrective phase. When an index falls 10% from its peak in a short span, it’s considered a correction. A 20% decline makes it a bear phase.
On Wednesday, the NSE Nifty fell 324.4 points to close at 23,559.05. The BSE Sensex shed 984.23 points to end at 77,690.95. Both indices have slid around 3% in the past five days. Analysts said if the Nifty slides below 23,500 – a key support – there’s a likelihood that it will drop past 23,000.
Shares worth Rs 2,502.6 crore sold
“The weak earnings this quarter is the major dampener of investor sentiment, amplified by the unrelenting foreign selling,” said Siddhartha Khemka, head of retail research, Motilal Oswal Financial Services. “This pressure is likely to remain in the short term.”
Foreign portfolio investors (FPIs) sold shares worth a net ₹2,502.58 crore on Wednesday. Their domestic counterparts bought shares worth ₹6,145.24 crore. So far in November, overseas investors have sold equities worth ₹23,570.58 crore after the record offloading of ₹1 lakh crore in October.
The rise in consumer inflation to 6.2% in Octobe-the highest in 14 months-has also impacted sentiment. “Retail inflation is way above expectations and pushed the hopes of an interest rate cut further away, which added to the pressure on Indian markets,” said Khemka.
All sectoral indices ended lower – the Nifty Realty fell 3.2%, while the Bank Nifty and Nifty PSU Bank dropped 2.1% and 3.1%, respectively. The Nifty Auto and the Nifty Financial Services indices fell around 2% each.
The Mid-cap 150 index declined 2.7% while the Small-cap 250 index ended 3.1 lower. Both indices closed at their lowest since June.
In the past week, the mid-cap and small-cap indices have dropped 6.1% and 7.5%, respectively. Out of the 4,067 shares traded on the BSE, 3,384 declined and 599 advanced.
Technical analysts said that the slide in large-cap stocks indicates more imminent pain with most sectors having broken through near-term support levels.
200-DMA test for Nifty
“The Nifty may find support close to the 200-day moving average level of 23,550 levels but if this support is breached, then it could slide down to 23,000 levels,” said Rajesh Palviya, senior vice president research, technical and derivatives, Axis Securities. “While mild pullbacks cannot be ruled out, the sentiment remains negative.”
Palviya said that if the Nifty falls below the 200-day moving average, markets could enter a bearish phase.
Elsewhere in Asia, China gained 0.5%, Taiwan fell 0.5% and South Korea ended 2.6% lower. Hong Kong declined 0.1% while Indonesia fell 0.2%.
India’s Volatility Index rose 5.03% to 15.44 on Wednesday, signalling that traders see near-term risks to the market. “The 10% correction from the top is healthy and there’s no sign of a bearish signal as of now,” said Khemka. “The pace of FII (foreign institutional investor) selling could slow down as December typically is marked by less foreign activity.”
Palviya said that the portfolios of retail and domestic investors are in the red and high net worth individuals (HNIs) are also on the backfoot after the 10% correction.