Nifty slips below 21,900, Sensex barely holds 72,000: Key factors behind today's fall

Domestic equity markets settled sharply lower on Tuesday as the headline indices dropped more than a per cent each. Weak global and domestic cues weighed on the market sentiments, while traders prefered to avoid any unwarranted risk ahead of the US Fed's monetary policy due tomorrow. Broader markets were also marred hard.

The BSE Sensex dropped more than 736.37 points, or 1.01 per cent, to 72,012.05, while NSE's Nifty50 tumbled 238.25 points, or 1.08 per cent, to 21,817.45 for the day. Broader markets plunged in-line as the BSE midcap and smallcap indices shed more than a per cent each. Fear gauge India VIX rose more than 1.5 per cent to 14.11-mark.

Following the BoJ's decision to hike interest rates for the first time in 17 years, the Asian peers’ mood turned sour, which pulled the Indian market to continue its recent pessimism. The correction in the domestic market has been triggered by concerns over premium valuations, said Vinod Nair, Head of Research, Geojit Financial Services.

"The delay of rate cuts by the US Fed due to hotter than expected inflation, which is evident from the upward trend in the dollar index. Investors are exercising caution as they await the upcoming US Fed meeting, seeking indications on the potential timing of a reversal in the rate cycle. Additionally, the gradual increase in crude oil prices is further dampening market sentiment," he said.

Here are the key factors that weighed on global sentiments.

Global stocks tumble
Global shares dipped on Tuesday while the yen slid after the Bank of Japan met market expectations and ended eight years of negative interest rates, likely the highlight of a busy week for central banks. MSCI's world share index dropped 0.16 per cent, though was still around all-time highs, and the US benchmark 10-year Treasury yield was around 2 basis points lower at 4.324 per cent.

Selling in heavyweights
Selling pressure in the index heavyweights weighed on the markets sentiments. Blue-chips like Tata Consultancy Services, Infosys and Reliance Industries were the biggest laggards, contributing about 360 points fall in the 735 points fall of the BSE Sensex. ITC and Larsen & Toubro also settled in red.

FII's selling
Provisional data available with NSE suggest that FPIs turned net sellers of domestic stocks to the tune of Rs 2,051.09 crore on Monday.

US Fed monetary policy
The Federal Reserve's two-day meeting wraps up on Wednesday, and central banks in Britain, Norway, and Switzerland meet Thursday. All are expected to keep rates steady, though markets are not ruling out a move in the Alps.

The day's big news was in Japan, where the Bank of Japan (BoJ) heralded a new era as it shifted away from years of ultra-easy monetary policy. It also abandoned bond yield curve control and dropped purchases of riskier assets, including exchange-traded funds.

Crude oil prices at 4-month high
Oil prices were largely steady on Tuesday near four-month highs after breaking above range-bound trading last week, but the prospect of rising exports from Russia weighed amid Ukrainian attacks on refineries. The Brent crude oil futures contract for May delivery was down 15 cents to $86.74 a barrel at 0946 GMT, while US West Texas Intermediate prices were down 9 cents to $82.07.

Technical indicators
We may soon observe profit booking due to overvaluation and the SEBI mutual fund stress test’s impact on mid and small-cap funds. On the other hand, with the Lok Sabha elections approaching closer and crucial developments in government policies coming into action, there is caution in the air, said VLA Ambala Founder at Stock Market Today.

"Nifty’s major support levels for this week could be around the 21,500 to 21m460 range, while key intraday support is expected at 21,780 and 21,670. Similarly, for the next session, major resistance is likely to be seen at the 21,860 and 21,920 range," he said.