Tech-Led Global Selloff and Fed Rate Concerns Drive Down Indian Equities
India’s benchmark indices experienced their steepest single-day decline in nearly a month, reflecting a widespread selloff in Asian markets driven by weakening global technology and semiconductor stocks. This downturn was compounded by a strengthening US dollar amid expectations of potential interest rate hikes by the US Federal Reserve to combat inflation. The NSE Nifty 50 fell by 1.2% to close at 23,824.10, while the BSE Sensex also dropped 1.2%, finishing at 76,200.68. South Korea’s Kospi saw a significant plunge of 10% due to concerns over overheated valuations in the chip sector, prompting market-wide circuit breakers. Other Asian markets, including Japan and Hong Kong, also saw declines, with Japan falling 3.6% and Hong Kong dropping 1.8%.
On the domestic front, market sentiment was notably negative, with all sectoral indices except for pharma and healthcare closing lower. The Nifty Metal index decreased by 3.2%, while both the Nifty PSU Bank and IT indices retreated by approximately 2%. The Bank Nifty reflected this bearish trend, falling by 1.3%. Despite foreign portfolio investors recording a modest net purchase of ₹17.9 crore, domestic institutional investors were more active buyers, acquiring shares worth ₹680.2 crore. However, in June, foreign investors have significantly offloaded shares worth ₹34,272.8 crore, suggesting underlying bearish sentiment.
The Nifty Midcap 150 and Nifty Smallcap 250 indices registered declines of 1% and 0.6%, respectively. Yet, both indices have shown resilience over the past week, gaining 2.2% and 5.7%, indicating potential volatility amidst profit-taking behavior in the broader market. A total of 4,447 shares were traded on the BSE, with 1,497 advancing while 2,790 declined, underscoring the overall negative sentiment among investors.
Market volatility, as indicated by the India VIX, surged by 8.6% to 13.9, suggesting heightened risk conditions in the near term. Analysts indicate that while the bias was negative, the Nifty remained within a range of 23,800 to 24,240, implying that a major decline may be averted unless it breaches the lower threshold. Should the index drop below 23,800, a more pronounced selloff could occur. Encouragingly, derivative data suggests that options appear slightly oversold and could enable a rebound to 24,000. However, the overall positional bias remains sideways in the immediate term, prompting investors to approach market movements with caution.
Source: The Economic Times
(Expert Note: This report was prepared by the Wealthova team.)