India’s ascent to the world’s fourth-largest stock market by defeating Hong Kong, Sensex took an unexpected dip, plummeting over 1,000 points to close at 70,371. Simultaneously, Nifty experienced a 1.5% drop, concluding below the 21,250 mark. The broader market witnessed a more profound sell-off, with mid and small-cap indices sliding around 3%. In the process, Dalal Street investors suffered losses of approximately Rs 8 lakh crore, causing the market capitalization of all BSE-listed stocks to decline to Rs 366.3 lakh crore.
Contrary to positive global market momentum, sectors such as banks, oil and gas, FMCG, and metals led the downside, while buying activity was observed in pharma stocks. RIL and HDFC Bank significantly contributed to about half of Nifty’s loss.
Key factors behind today’s market fall include:
HDFC Bank’s Impact:
The heavyweight counter played a significant role, accounting for about one-third of the day’s loss. HDFC Bank shares experienced a 3% drop, triggered by disappointment from the December quarter results.
RIL’s Decline:
Reliance Industries (RIL), India’s most valued company, saw a 2% decline, emerging as the second biggest contributor to the day’s fall. Global brokerage Citi downgraded the stock to a neutral rating, emphasizing a more balanced risk/reward scenario.
Sebi’s Ownership Norms:
Markets regulator Sebi’s potential tightening of ultimate beneficial ownership norms for overseas investors from February 1 added to the market uncertainty. Despite pressure from foreign banks and offshore fund managers, Sebi may implement stricter rules, leading to an estimated sell-off in Indian stocks.
FII Selling:
After two months of buying, Foreign Institutional Investors (FIIs) turned net sellers, offloading Indian stocks worth over Rs 13,000 crore in the current month. Domestic institutions, led by Mutual Funds (MFs), are attempting to absorb the sell-off.
Profit-Booking:
Analysts warned against overbought conditions as retail investors remained committed to stock buying without considering valuations. In the last three months, Nifty rose by approximately 9%, while mid and small-cap indices surged around 17%.
