The prospect of lower-than-expected flows into HDFC Bank later this month, after the MSCI decided to raise the stock’s weight on its index in two tranches-in August-end and in November-also pulled down sentiment.
The NSE Nifty fell 208 points or 0.85% to close at 24,139. The BSE Sensex declined 692.89 points or 0.87% to end at 78,956.03 on Tuesday.
While the market started on a tentative note, the sell-off deepened on reports that the White House has warned that Iran or its proxies could launch an attack on Israel in the coming days.
“A lot of factors like global uncertainties, geopolitical tensions and the latest report from Hindenburg have led to some caution in the market participants,” said Rajesh Palviya, head of technical and derivatives research at Axis Securities.
HDFC Bank dropped 3.3%.
Reluctant to Hold Overnight Positions
“The disappointment in the market today was partly because MSCI said it would raise HDFC Bank’s weightage in batches instead of at one go, which had been taking the markets higher earlier,” said Andrew Holland, chief executive, Avendus Capital Public Markets Alternate Strategies. “Traders also lightened some positions before the announcement of US CPI inflation data on Wednesday and the market holiday after that.”The July US CPI inflation data could see a decline, paving the way for an interest rate cut by the Federal Reserve in September. But with the financial markets shut on Thursday for Independence Day, traders are reluctant to hold overnight positions.
Volatile Markets
NSE’s Volatility Index surged 1.9% to 16.17, suggesting traders are seeing risks in the market in the near term. The index has gone up almost 14% in the last month.
“We may see Nifty go to 24,000 levels again and Bank Nifty at 49,500, and the near-term trend remains weak for both. A fall below these levels can take the indices down further,” said Palviya of Axis Securities.
The build-up in Nifty options suggests the index is facing resistance at higher levels. “We saw call writing at 24,400-24,500 strikes in the beginning of the series, and there has been no short covering in these positions yet, putting more pressure on the market,” said Palviya.
Foreign portfolio investors net sold shares worth ₹2,107 crore. Domestic institutions were buyers of ₹1,240 crore worth of shares.
The Nifty Midcap 150 dropped 0.77% and the Nifty Small-cap 250 fell 1.23%. Of the 4,026 stocks traded on the BSE, 1,202 advanced and 2,743 fell.
Elsewhere in Asia, China advanced 0.3%, Hong Kong rose 0.4%, South Korea gained 0.1% and Taiwan was up 0.1%.
The pan-Europe index Stoxx 600 was down 0.1% at the time of going to print.