Dalal Street bleeds: FII selling, Trumponomics, and rising domestic inflation collide!

The Indian stock market faced a significant downturn after a promising start. The BSE Sensex and NSE Nifty bled heavily, with the Sensex dropping 1,273 points (1.59%) from its day's high of 79,820 to close at 78,547. Meanwhile, the Nifty50 slipped 403 points (1.66%) from its intraday high of 24,242, ending at 23,839.

By the closing bell, the Sensex had recovered slightly but still ended 821 points (1.03%) lower at 78,999, while the Nifty50 closed at 23,883, down 257 points (1.07%).

The sell-off was driven by increased foreign institutional investor (FII) activity, weak quarterly earnings reports, and declines in key sectors such as auto, banking, and financial services.

"FII-triggered selling pressure continued to impact the domestic market. The recent strengthening of the dollar, driven by aggressive ‘Trumponomics’ is adding fears. Additionally, the anticipated rise in domestic inflation, due to increasing food prices, along with depreciating INR, may influence the RBI’s monetary policy. Most sectors were in the red, while IT stocks gained on expectations of increased US IT spending," said Vinod Nair, head of research at Geojit Financial Services.

Among the heavyweights dragging the Sensex down, HDFC Bank was the largest contributor, losing 291 points. Other notable contributors included SBI (-59 points), NTPC (-38 points), Bajaj Finance (-33 points), and Tata Motors (-31 points).

Sectoral Performance and Broader Markets

Most sectors traded in the red, except for Nifty IT (up 0.36%) and Nifty Realty (up 0.94%). Sectors facing the most pressure included Nifty PSU Bank (down 1.48%), Nifty Auto (down 1.40%), and Nifty Financial Service (down 1.34%). Nifty FMCG, Nifty Bank, and Nifty Consumer Durables also fell around 1% each in intraday deals.

The broader markets were also affected, with the BSE SmallCap index down 0.55% at 53,986.37, and the BSE MidCap index down 0.45% at 45,507.95.

Key Stock Movements

HDFC Bank was the top loser among the Sensex constituents, falling 2.53% intraday. It was followed by Asian Paints (-2.4%), NTPC (-2.4%), SBI (-2.2%), and Tata Motors (-2.1%). Shree Cement hit a 52-week low, down 4% on disappointing Q2 results.

Despite the overall bearish trend, there were a few bright spots. IT stocks gained on the back of expected increased US IT spending, while Britannia saw a 9% dip over two days, hitting a five-month low.

Market Analysis

Analysts point to two strong factors at play: relentless FII selling favoring the bears and sustained buying by domestic institutional investors (DIIs) supporting the market. Dr. V K Vijayakumar, chief investment strategist at Geojit Financial Services, noted, "The intensity of FII selling is coming down, and mutual fund inflows are steadily increasing, which will enable DIIs to continue buying. Monthly flows into equity mutual funds hit an all-time high of Rs 41,887 crores in October, a 22% month-on-month increase."

Technical View

Technical analysts indicate that Nifty's underlying trend remains choppy with a weak bias. "The market is moving in a broader high-low range of 24,600-23,800 levels. Having declined from the upper range recently, Nifty is expected to witness an upside bounce from near the lower range of 23,800 levels in the short term. Immediate resistance is around 24,300," said Nagaraj Shetti, senior technical research analyst at HDFC Securities.

Global Markets

The downturn in the Indian market mirrored a similar trend in the Asia-Pacific markets. Japan's Nikkei 225 traded 0.40% lower, South Korea’s Kospi dropped 1.94%, and Australia’s S&P/ASX 200 was down 0.13%. Hong Kong’s Hang Seng index slipped 2.84%.

As the market adjusts to these fluctuations, investors will closely watch FII activity, domestic economic indicators, and global market trends to gauge the direction of future movements.