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The Indian stock market experienced a significant downturn on Monday, with the benchmark Sensex plummeting over 1,200 points and the Nifty 50 dipping below the crucial 26,000 level. This sharp decline was attributed to a confluence of global and domestic factors that dampened investor sentiment. The selloff intensified in the final hour of trading, indicating growing caution among investors.
A key driver of the market's downward trajectory was the profit-taking that followed a recent record-breaking rally. Investors, after witnessing sustained gains, decided to lock in profits, leading to selling pressure across various sectors. Additionally, mixed global cues, particularly escalating tensions in the Middle East, contributed to the bearish sentiment. Investors were also apprehensive about the upcoming speech by Federal Reserve Chair Jerome Powell, anticipating potential hints about future interest rate adjustments.
Furthermore, a surge in China's equity market, driven by favorable valuations and stimulus hopes, attracted foreign investors away from Indian markets. This shift in investment sentiment, fueled by China's economic outlook, further exacerbated the downward pressure on Indian indices. The broader markets were also affected, with the BSE Midcap index losing half a percent, while the BSE Smallcap index remained relatively flat.
Sectorally, the decline was widespread, with 12 out of 13 sectoral indices ending in the red. The Nifty Auto index experienced a significant slump of over 2 percent, ahead of the release of monthly auto sales data. Research reports indicated that demand trends for automobiles remained weak across segments in September, despite the festive seasons. The inauspicious Shraddh period further impacted sales, resulting in a year-on-year decline in retail sales across categories.
However, the Nifty Metal index defied the overall trend, rising for the eighth consecutive session. This was primarily attributed to a spike in iron ore prices and China's efforts to revitalize its struggling property market. The strength in the metal sector provided some relief amidst the broader market downturn.
Market experts emphasized the importance of the upcoming Reserve Bank of India's Monetary Policy Committee (MPC) meeting next week. It is widely anticipated that the MPC would maintain status quo on policy rates, seeking to control inflation and avoid potentially destabilizing food inflation fluctuations. The Indian economy, according to experts, does not face the challenge of consistently declining GDP growth at this time.
Among individual stocks, Mahindra & Mahindra (M&M), Bharat Electronics, and Hero MotoCorp experienced the most significant losses, dropping 3-4 percent. On the other hand, Tata Steel, Hindalco, and NTPC benefited from the metal index's strength. New Nifty 50 entrants, BEL and Trent, faced a challenging debut as index constituents, declining 3 percent and 4 percent, respectively.
Source: Sensex crashes over 1,200 points, Nifty sinks below 26,000; bank, energy stocks worst hit