Why Sensex and Nifty are on a decline
India's benchmark indices Sensex and Nifty 50 continued to see strong selling today, extending losses to a third consecutive session. At the time of writing, the Sensex was down 240.87 points, or 0.33%, at 71,259.89 and the Nifty was down 86.10 points, or 0.39%, at 21,485.85. Around 797 shares were up while over 2,260 were trading in red. Yesterday, the bourses recorded their worst session in 19 months, crashing over 1.8%. So what is pulling the market down?
Factors affecting performance of the market
The Dalal Street is affected by a mix of factors. With US Federal Reserve's hawkish remarks, investors are now skeptical of reduced interest rate in March. The yields on the US benchmark 10-year treasury bonds bounced back to levels above 4%. Other concerns include subdued trade in most global markets, disappointing Chinese economic data, rising tension in the Middle East, overbought condition in the Indian stock market, and continued selling of HDFC Bank shares after its disappointing Q3 numbers.
Nifty expected to fall up to 21,000 levels
Experts predict further weakness in benchmark indices in the near future, with the Bank Nifty index expected to remain rangebound. Nirav Harish Chheda, Assistant Vice President-Equity Derivatives & Technical Research at Nirmal Bang, informed Moneycontrol that they anticipate Nifty to drop to 21,000 levels as India Inc continues to reveal its Q3 report card in the coming days.
Bank Nifty's future and widespread selloff
Banking stocks, which comprise about 35% of Nifty's weightage, experienced weakness within the first hour of trading today. Ajit Mishra, Senior Vice-President at Religare Broking, stated that if Bank Nifty fails to maintain 45,700 throughout the day, a decline to 44,500 could be possible. It is presently hovering at around 46,000. In addition to banking stocks, a widespread sell-off occurred across sectors with Nifty Media, Metal, and Realty indices dropping up to 3% today.
Mid and smallcap segments in 'bubble zone'
Broader markets underperformed benchmarks with Nifty Midcap 100 and Nifty Smallcap 100 indices falling 2% each on opening deals. Analysts predict a deepening correction in both segments as they enter a bubble-zone. A stock market bubble is a significant rise in stock prices without a corresponding increase in the value of the businesses that they represent. Vinay Paharia, CIO of PGIM India Mutual Fund, cautioned that many weak mid and smallcap stocks are in the bubble zone.
