Stock market today: Nifty 50, Sensex crack; investors lose ₹8 lakh crore; 4 key factors that hit the Indian stock market

Stock market today: An all-round selloff swept through the Indian stock market on Friday, July 19, leading to losses of approximately 1 per cent for the benchmark indices, Nifty 50 and Sensex. The midcap and smallcap segments experienced even steeper declines as investors booked profits across sectors ahead of the Union Budget next week. Weak global cues also contributed to the downturn in the domestic market.

Snapping their winning streak of the last four consecutive sessions, Nifty 50 closed the day with a loss of 270 points, or 1.09 per cent, at 24,530.90, while the Sensex ended at 80,604.65, down 739 points, or 0.91 per cent.

The BSE Midcap and Smallcap indices cracked over 2 per cent each.

The overall market capitalisation of the firms listed on the BSE dropped to nearly ₹446.3 lakh crore from nearly ₹454.3 lakh crore in the previous session, making investors poorer by about ₹8 lakh crore in a single session.

During a brief surge during the session, the Sensex and Nifty 50 reached new all-time highs of 81,587.76 and 24,854.80, respectively.

As many as 46 stocks ended in the red in the Nifty 50 index and only four- Infosys (up 1.78 per cent), ITC (up 0.62 per cent), Asian Paints (up 0.60 per cent) and Britannia (up 0.06 per cent) closed in the green.

Shares of Tata Steel (down 4.97 per cent), JSW Steel (down 4.68 per cent) and BPCL (down 3.98 per cent) closed as the top losers in the index.

Amol Athawale, the VP of technical research at Kotak Securities, observed a long bearish candle on daily charts and a shooting star candle formation on weekly charts, indicating temporary weakness in the near future. However, the market's medium-term texture is still on the positive side.

"The current market texture is non-directional and volatile; hence, level-based trading would be the ideal strategy for the traders. 24,500/80,400 and 24,350/80,000 would act as a key support zone for the bulls, while 24,850-25,000 /81,600-82,000 could be the key resistance areas for the traders," said Athawale.

"Below 24,350/80,000, the sentiment could change. Below the same, positional traders may prefer to exit from the trading long positions," said Athawale.

Why did the market fall today?

 

Experts have identified the following four key factors that may have triggered the selloff in the Indian stock market:

1. Weak global cues

Markets across the globe were in a sombre mood on Friday amid growing uncertainty over the outcome of the US presidential race. Weak Chinese macro data and deepening China-US trade tensions also weighed on sentiment.

2. Caution ahead of Union Budget

 

Back home, apart from weak global cues, caution ahead of the Union Budget, which will be presented on Tuesday, also kept investors away from riskier equities. There is hope that the government will announce a pro-growth budget that will keep the focus on fiscal consolidation and economic growth. Still, experts also anticipate some hues of populism.

"This decline signals caution ahead of the Union Budget, as participants chose to book profits," said Ajit Mishra, SVP - Research, Religare Broking.

"We may see further dips in the Nifty, with the next crucial support at the 24,150 level, corresponding to the 20-day EMA (exponential moving average). Traders are advised to avoid aggressive positions and opt for hedged trades. For now, it is also recommended to focus on index majors rather than midcap and smallcap stocks," said Mishra.

3. IT outage

Experts said reports of system outages across industries due to an issue with the Microsoft update also influenced sentiment.

"The domestic market closed today with a downturn due to the global sell-off, triggered by operating system issues that caused devices to crash worldwide. The global IT outrage has led to disruptions in various Indian industries. The overvalued market is also experiencing profit-booking ahead of the Budget next week. The recent performance has been bullish in anticipation of pro-industry and populist measures," said Vinod Nair, Head of Research at Geojit Financial Services.

“Markets plunged in the last hour trade on broad-based profit-taking. IT stocks, which held ground in early trades, too, gave up their gains, while other sectoral and broader indices incurred substantial losses after sentiment turned extremely bearish on weak global cues and reports of online businesses in several countries, including in India, hit by cyber outages,” said Prashanth Tapse, Senior VP (Research), Mehta Equities.

4. Concerns over valuation

Concerns over rich market valuation are also seen as a factor that triggered a profit booking. Nifty 50 is trading above its two-year average price-to-earnings (PE) ratio.

As per the equity research platform Trendlyne, Nifty's current PE is 23.6, which is above its two-year average PE of 21.9.

Its current price-to-book (PB) ratio is 4.2, slightly above its two-year average PB of 4.1.

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