Stock markets came under heavy selling pressure on Tuesday, with the Sensex tumbling over 600 points and the Nifty slipping below the 24,000 mark as a spilled over to Dalal Street.
The S&P BSE was down 615.68 points, or 0.80%, at 76,478.39, while the NSE Nifty50 fell 187.50 points, or 0.78%, to 23,915.40 at around 2:20 pm.
The decline comes after a strong seven-session rally that had lifted the Nifty by more than 1,800 points from its March lows, fuelled by easing tensions in West Asia, lower crude oil prices and moderating foreign investor outflows.
The biggest trigger for Tuesday’s decline was a broad selloff across Asian equity markets.
The MSCI Emerging Asia Index fell more than 4%, putting it on course for its worst session in over two weeks after touching a record high a day earlier.
South Korea’s KOSPI plunged 10%, marking its steepest fall since March, as investors rushed to book profits in technology stocks. Chipmaking giants Samsung Electronics and SK Hynix slumped more than 12% each.
Taiwan’s benchmark index, another market heavily exposed to -linked stocks, also declined as investors turned cautious after a sharp run-up.
The weakness in Asian markets followed growing expectations that the US Federal Reserve could raise interest rates later this year under its new chairman Kevin Warsh. Markets are now pricing in a 75% chance of a rate hike by September.
Higher US rates generally make emerging markets less attractive for foreign investors and often trigger risk-off sentiment across global equities.
Technology stocks emerged as the biggest drag on Indian markets.
The Nifty IT index slumped nearly 2%, making it the worst-performing sectoral index.
Among Sensex stocks, Infosys plunged 2.78%, TCS fell 2.94%, HCLTech dropped 1.38% and Tech Mahindra lost 1.61%.
The weakness in IT shares mirrors concerns seen across global technology stocks as rising US bond yields and expectations of tighter monetary policy threaten growth-oriented sectors.
Indian IT companies derive a significant portion of their revenues from the United States. A higher interest rate environment can slow technology spending by clients and weigh on future earnings growth.
Apart from IT, metal stocks witnessed sharp selling.
The Nifty Metal index declined 3.39%, making it the second-worst performing sector of the day.
Tata Steel was among the biggest losers on the Sensex, falling 2.89%.
The selloff reflects concerns over global growth and demand after the sharp correction in Asian markets.
The weakness was visible across market segments.
The Nifty 100 fell 0.85%, while the Nifty 200 dropped 0.85%.
The Nifty Midcap 100 declined 0.86% and the Nifty Midcap 50 lost 0.73%.
Smallcaps were relatively resilient but still traded lower, with the Nifty Smallcap 100 down 0.43%.
India VIX jumped 7.24%, indicating a rise in market nervousness.
Not all sectors were under pressure.
Defensive segments such as healthcare and pharmaceuticals attracted buying interest.
The Nifty Pharma index rose 1.12%, while the Nifty Healthcare Index gained 0.77%.
Among Sensex constituents, Power Grid climbed 0.86%, Axis Bank rose 0.73% and Sun Pharma gained 0.71%.
According to Dr VK Vijayakumar, Chief Investment Strategist at Geojit Investments Limited, markets have already priced in much of the good news stemming from lower crude oil prices and improving prospects for peace in West Asia.
He noted that stability in the rupee and moderating foreign portfolio investor selling remain positives for the market.
However, he highlighted a new concern: the monsoon.
“The concern now is the poor monsoon, so far this season. The deficit now is huge at 42.2%. If the feared super El Nio leads to a sharp shortfall in monsoon, it can be negative for growth and inflation. Poor monsoon can impact rural demand and sectors like FMCG,” he said.
Vijayakumar also pointed out that global investors will closely watch signals from the US Federal Reserve, as elevated inflation and rising bond yields continue to pose risks for equities worldwide.
Market experts believe Tuesday’s decline is partly a result of profit booking after a strong run-up in recent sessions.
While lower crude oil prices — Brent crude remains below $80 per barrel — continue to support India’s macroeconomic outlook, investors appear to be searching for fresh triggers after the recent rally.
For now, the combination of global market weakness, rising US rate expectations, concerns over the monsoon and selling in IT stocks has been enough to halt Dalal Street’s momentum.]
(Disclaimer: The views, opinions, recommendations, and suggestions expressed by experts/brokerages in this article are their own and do not reflect the views of the India Today Group. It is advisable to consult a qualified broker or financial advisor before making any actual investment or trading choices.)