Sensex falls below 80,000: Nifty's 'Doji' pattern reflects market uncertainty and indecision

Sensex drops below 80,000 amid high volatility

Foreign investors pull out nearly Rs 1 lakh crore from Indian equities

Nifty forms 'Doji' pattern, indicating market indecision

The domestic stock market continues to face significant challenges, with the Sensex falling below 80,000 points in early trading on Friday. Investor anxiety is heightened as the market struggles to recover from a prolonged decline, driven by foreign investor selling and disappointing corporate earnings for the second quarter.

Key Factors Behind the Decline

Foreign Institutional Investors (FII) Outflows: The benchmark indices, including the Sensex and Nifty, have been under pressure due to sustained selling from Foreign Institutional Investors (FIIs). This month, FIIs have withdrawn a substantial Rs 98,085 crore from Indian equities, severely impacting market sentiment.

Dr. V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services, notes that the usual “buy on dips” strategy has failed to hold up, citing weak earnings reports and downward revisions in FY25 estimates as contributors to the bearish market mood.

Despite the heavy FII selling, mutual fund inflows are offering some relief, enabling Domestic Institutional Investors (DIIs) to absorb the impact. Vijayakumar remains optimistic about growth stocks, particularly in large-cap financials, which he believes could be more resilient.

Technical Indicators: Sameet Chavan, Head of Research at Angel One, highlights that caution prevails on the technical front. The Nifty index, closing just below 24,400, formed a “Doji” pattern—an indication of market indecision.

Chavan anticipates Nifty to remain within a narrow range of 24,350 to 24,200 in the short term, with resistance around 24,500-24,600. He suggests that a breakout above 25,000 could shift the outlook to a more bullish stance. Until then, any upward movement should be viewed as a temporary recovery.

Underwhelming Q2 Earnings: The Q2 earnings season has been disappointing, with many companies reporting weaker-than-expected results. Sectors like IT, pharmaceuticals, and textiles are particularly affected, adding to the cautious market sentiment.

Prashanth Tapse, Senior VP at Mehta Equities Ltd., points out that upcoming earnings reports from major companies such as JSW Steel, Bandhan Bank, and Indigo will be critical to monitor.

Tapse also warns that the upcoming US presidential election could have global market implications, further affecting Indian stocks, especially those in IT and pharmaceuticals that rely heavily on international business.

Should Investors Be Worried?

While the market is going through a tough phase, analysts are not entirely pessimistic. Some see opportunities in selective stocks that have rebounded from strong support levels. However, experts recommend being cautious and selective when making trades in the current environment.

For now, attention remains on how the market reacts to further corporate earnings, international cues, and any changes in FII selling. If the market can break above key resistance levels, there could be potential for recovery, but until then, volatility is expected to continue.

For traders, focusing on support and resistance levels and using stop-losses is essential to navigate this uncertain market phase.

(Disclaimer: It is advisable to consult a qualified broker or financial advisor before making any actual investment or trading choices.)