Sensex dives over 700 points, Nifty gives up 21,250: Key reasons behind the fall

Indian equity benchmarks on Thursday returned to the negative territory after a brief single-day pause. The domestic indices fell sharply in late morning deals, dragged by technology, banks, financials and pharma stocks. The 30-share BSE Sensex pack slumped 718 points or 1.01 per cent to trade at 70,342 while the broader NSE Nifty index was down 205 points or 0.96 per cent at 21,249 level.

Selling interest in index-heavyweight stocks such as HDFC Bank, Axis Bank, ITC, ICICI Bank, TCS, Tech Mahindra and Infosys pulled the indices lower. Such was the fall that nearly Rs 1.8 lakh crore of BSE market capitalisation (m-cap) was wiped out. Investor wealth, as suggested by the BSE m-cap, fell Rs 1.76 lakh crore to Rs 369.41 lakh crore today compared with a valuation of Rs 371.18 lakh crore recorded yesterday.

Here are the key reasons behind the stock market fall:

Soft quarterly earnings

Domestic bourses have seen a sharp correction after a few of their key constituents posted a soft set of quarterly numbers during Q3 FY24. To recall, HDFC Bank reported weak margins for the second consecutive quarter which led to a sharp drop in the private lender's stock price.

Tech Mahindra today slumped after the IT company recorded a slump in its third-quarter net profit. The stock slipped 6.09 per cent to hit a day low of Rs 1,322 against a previous close of Rs 1,407.75.

The fifth-largest Indian IT services firm's net profit fell to Rs 510 crore for the three months ended December 31, 2023, down 60.6 per cent from Rs 1,297 crore a year earlier.

Beside this, India's IT industry has been hurting due to an uncertain demand environment as clients cut back on spending amid inflation and recession fears.

Going ahead, market participants would be keenly watching upcoming quarterly results for cues.

FIIs selling

Foreign institutional investors (FIIs) offloaded Rs 6,934.93 crore worth of shares on a net basis during the previous session, while domestic institutional investors (DIIs) bought Rs 6,012.67 crore worth of shares, exchange data showed.

"Overall sentiment remains muted as concerns persist on FIIs selling due to premium valuations in India and weaker-than-expected earnings so far," said Vinod Nair, head of research at Geojit Financial Services.

F&O expiry

Today's decline in the market could be due to the settlement of F&O (Futures and Options) contracts. It is expected that Nifty may encounter resistance at higher levels, particularly with the 21,600 'Call' strike holding significant open interest, said Shrey Jain, Founder and CEO SAS Online - India's Deep Discount Broker. On the downside, support is expected from 'Put' writers at 21,300 and 21,400 levels, he added.

Global cues

On the global front, Asian shares were muted as investors awaited more details on China's stimulus plans. Overnight, Wall Street equities settled on a mixed note.

(Disclaimer: Business Today provides stock market news for informational purposes only and that should not be construed as investment advice. Readers are encouraged to consult a qualified financial advisor before making any investment decisions.)

Also read: Stock recommendations by analyst for January 25, 2024: NMDC Steel, CEAT and PowerGrid

Also read: Stock market: Nifty fell in six of 10 last Februarys. What's ahead? Keep an eye on these F&O shares