Stock markets recently faced a decline, with both Sensex and Nifty dropping by around 1.5% on Wednesday. This slump was driven by sustained foreign fund outflows, concerns over sectoral demand, and a fluctuating rupee. As a new trading session begins, caution remains the sentiment among market participants. The GIFT Nifty, a key indicator for Indian market sentiment, showed a slight dip of 7 points to 23,636.50, suggesting a flat or subdued start.
Foreign Institutional Investors (FIIs) have been consistently withdrawing funds, with over Rs 27,600 crore taken out in November alone. Since Nifty’s peak on September 27, FIIs have pulled approximately Rs 1.2 lakh crore from Indian markets, leading to a 10% drop in the index and a breach of the 200-day moving average. This has contributed to a bearish trend, particularly in stocks like Axis Bank, Voltas, NMDC, and REC. Voltas is under notable selling pressure, with specific downside targets of Rs 1,617 and Rs 1,559, as highlighted by Prashanth Tapse from Mehta Equities. He emphasized that a cautious approach is warranted, with aggressive downside targets for Nifty and Bank Nifty.
Globally, the US market's influence remains significant. US inflation has been on a downward trend, falling from 9.1% in June 2022 to 2.4% in September 2024, the lowest in over three years. Although core inflation rose slightly to 3.3%, the relatively stable inflation numbers have sparked speculation that the US Federal Reserve might cut interest rates in December. This potential move could offer relief to global equity markets, though the strength of the US dollar—currently at a one-year high—is posing challenges for emerging markets, including India.
Domestic challenges continue to weigh heavily on Indian markets. The rupee held steady at 84.39 against the US dollar on Wednesday, reflecting currency pressure. Key sectors like auto, infrastructure, and consumer goods are also facing hurdles, leading to concerns about overall economic growth. FIIs continue to offload stocks, and Portfolio Management Services (PMS) firms may follow suit, seeking better returns abroad.
Market experts are offering varied strategies. Hrishikesh Yedve from Asit C. Mehta Investment Intermediates noted that the market sentiment remains bearish, with Nifty's behaviour around the 200-day exponential moving average (EMA) being crucial. He suggested that if Nifty falls below 23,500, it could drop further to the 23,300-23,200 range. Similarly, VLA Ambala from Stock Market Today sees additional declines of 3-5% for Nifty as likely, with key support around 23,460 and 23,200. Ambala also highlighted resistance levels between 23,850 and 23,940 for the coming sessions.
Global market activity was mixed. In the US, the Dow and S&P 500 saw slight gains on Wednesday, while the Nasdaq edged down after consumer price data met expectations, supporting hopes for a December rate cut by the Federal Reserve. In Asia, markets showed modest gains; Japan’s Topix rose 0.6%, and Australia’s S&P/ASX 200 increased by 0.5%, although Hong Kong’s Hang Seng futures fell by 1%. Oil prices also dipped slightly, hovering around $68 per barrel due to expectations of increased global production and lower demand forecasts, while a strong US dollar added pressure to oil prices—a positive factor for major oil importers like India.
Stocks like ABFRL, Granules, GNFC, Hindustan Copper, and Aarti Industries remain on the Futures and Options (F&O) ban list, indicating heavy trading volumes that exceed 95% of market-wide limits.
In terms of institutional activity, Wednesday saw Foreign Portfolio Investors (FPIs) continue as net sellers, withdrawing Rs 2,502 crore from the market. Meanwhile, Domestic Institutional Investors (DIIs) maintained their supportive stance, purchasing shares worth Rs 6,145 crore. This reflects a divergence between foreign and domestic investor outlooks, with DIIs providing stability amid the ongoing challenges.
Ajit Mishra from Religare Broking noted that Nifty’s recent decline of over 10% from its peak has brought the index close to a significant moving average support level. This suggests a potential for a rebound, though gains may be limited to specific stocks. He recommended traders maintain hedged positions and closely monitor support levels. The India VIX, a key indicator of market volatility, rose by 5.8% to 15.44 on Wednesday, signaling increased caution among investors. This heightened volatility suggests that a careful and balanced approach to trading is advisable, with attention to Nifty’s technical markers critical for navigating the current market climate.
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