On Thursday, November 28, the Indian equity markets extended their losses, with both major indices, BSE Sensex and NSE Nifty, falling by more than 1%. The decline was primarily driven by weakness in the IT and auto sectors, along with growing concerns over global economic trends and U.S. monetary policy.
Market Overview
By 1:30 pm, the BSE Sensex had dropped 931 points (1.2%) to 79,302, while the NSE Nifty slipped by 274 points to 24,000. Despite the broad market decline, the market breadth remained positive, with 1,865 shares advancing, 1,510 shares declining, and 98 remaining unchanged.
The IT and auto sectors were the biggest contributors to the market’s downfall. The Nifty’s IT index fell by 2.3%, and the auto index dropped by 1.3%. Key stocks in the IT sector, such as Infosys (-3%), TCS (-2.2%), Tech Mahindra (-2.5%), and HCL Tech (-2%), saw significant losses. In the auto sector, Mahindra & Mahindra (-3.2%) and Eicher Motors (-2%) were among the top losers.
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| Indian equity markets decline with Sensex and Nifty dropping amid global economic concerns |
Global Economic Concerns Weigh on Market Sentiment
The decline in Indian IT stocks was largely attributed to U.S. inflation data, which revealed a slower-than-expected pace of rate cuts. This development raises concerns about reduced client spending, particularly for Indian IT companies with significant exposure to the U.S. market. Global concerns regarding the U.S. Federal Reserve’s future rate cut trajectory are also adding uncertainty to emerging markets, including India.
Krishna Rao, Co-Head of Equity Broking at JM Financial Services, explained that volatility is expected to continue in the markets due to the lower pace of U.S. rate cuts, which are likely to be accompanied by higher inflation. This situation could lead to increased uncertainty in emerging markets and negatively affect investor sentiment.
Furthermore, a stronger U.S. dollar has dampened the appeal of emerging-market assets, with Asian equities facing pressure from both the dollar’s rise and escalating global trade tensions.
Technical Outlook for Nifty
According to Sudeep Shah, Head of Technical & Derivatives at SBICAP Securities, the Nifty is facing immediate resistance in the 24,320-24,350 range, aligned with its 100-day Exponential Moving Average (EMA). A sustainable move above this resistance could push the Nifty higher to 24,550 in the short term. However, the downside support levels of 24,160-24,130 are critical. If these levels are breached, the index could slide further toward 23,980.
Investor Sentiment: Cautious Approach Amid Global Headwinds
Despite the end of relentless Foreign Institutional Investor (FII) selling, experts believe that large institutions are likely to remain cautious due to ongoing global uncertainties. V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services, emphasized that while FII selling has slowed, FIIs are unlikely to become aggressive buyers, given the strong U.S. dollar and macroeconomic headwinds facing emerging markets.
Market Valuations and Future Outlook
The ongoing market correction has brought Indian equity valuations to more reasonable levels. The Nifty’s price-to-earnings (P/E) ratio has moderated from its peak of 25.8 in October to an estimated 21x. Anirudh Garg of Invasset PMS suggested raising cash levels in portfolios, as current valuations appear stretched.
While the cessation of FII selling provides some relief, experts caution that volatility is likely to persist in the near term as the markets absorb global economic cues and policy developments.
Conclusion: Navigating Volatility in Indian Markets
The Indian equity markets are facing significant headwinds due to global economic concerns, particularly regarding U.S. interest rates and the stronger U.S. dollar. IT and auto sectors are under pressure, and market volatility is expected to persist. Investors should adopt a cautious stance, monitoring technical indicators and global developments closely while adjusting their portfolios to account for the current market environment.
By staying informed and maintaining a balanced approach, investors can better navigate the ongoing market fluctuations and position themselves for long-term success in these uncertain times.
Disclaimer: The content provided is for informational purposes only and should not be construed as financial or investment advice. The views expressed are those of the author and do not reflect the official policy or position of any financial institution. Investing in stocks and securities involves risk, and past performance is not indicative of future results. It is recommended to consult with a professional financial advisor before making any investment decisions.