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The Indian stock market experienced a significant downturn on Wednesday, with the benchmark Sensex and Nifty indices plunging due to a confluence of negative factors. Investor sentiment was significantly impacted by persistent foreign institutional investor (FII) outflows, escalating retail inflation, and diminishing optimism surrounding potential rate cuts by the Reserve Bank of India (RBI).
The S&P BSE Sensex closed the day with a steep decline of 984.23 points, settling at 77,690.95. Similarly, the NSE Nifty50 index suffered a substantial loss of 324.40 points, ending the session at 23,559.05. This downward trend extended to broader market indices, which also experienced a sharp surge in volatility.
Across all Nifty Sectoral indices, a decline was observed, with the high-weightage Nifty Bank and Nifty Financial Services indices witnessing particularly steep drops. The Nifty Realty index, however, emerged as the biggest loser among sectoral indices, experiencing a decline exceeding 3%.
Despite the overall negative sentiment, a few stocks managed to register gains, albeit marginal. The top five gainers on Nifty50 included Britannia, Grasim, Tata Motors, Asian Paints, and NTPC. However, these gains did not exceed 0.5%, signifying a general market weakness.
In contrast, several stocks experienced significant losses, with Hero MotoCorp, M&M, Hindalco, Tata Steel, and Eicher Motors topping the list of losers. This downward trend reflects the broader market sentiment and suggests a prevailing pessimistic outlook among investors.
Analysts attributed the market downturn to a combination of factors, including persistent FII selling, weak corporate earnings, and a sharp surge in domestic inflation. Vinod Nair, Head of Research at Geojit Financial Services, highlighted the impact of these factors on investor sentiment, dashing hopes for an imminent rate cut by the RBI.
Nair further emphasized the significant weakness observed in mid and small-cap stocks, along with the Financials and Auto sectors. He attributed this broader market weakness to global anxieties about future US policy actions, particularly trade-related implications for the global economy, which has resulted in a strengthening US dollar and rising yields.
Prashanth Tapse, Senior VP (Research) at Mehta Equities Ltd, echoed Nair's sentiments, pointing to the sharp rise in inflation, surpassing the RBI's comfort level, as a primary driver of market volatility. This inflation surge has significantly diminished expectations for rate cuts in the near future.
Tapse also highlighted the relentless FII selling in local equities, coupled with rising US bond yields and disappointing corporate earnings, as factors prompting overseas investors to seek out relatively cheaper markets like China. These factors have combined to create a challenging environment for the Indian stock market, leading to the observed downturn.
Source: Sensex drops 1,000 points, Nifty slips below 23,600 amid stock market turmoil