Stock market today: Sensex, Nifty 50 resume downtrend; what is driving the market down? Explained with 5 factors

Stock market today: A day after snapping their multi-day losing streak, Indian stock market benchmarks- the Sensex and the Nifty 50- resumed their downward march on Thursday, November 21, amid weak global cues.

The domestic market witnessed a broad selloff as mid and small-cap segments also suffered losses.

The overall market capitalisation (m-cap) of BSE-listed firms dropped to nearly ₹425 lakh crore from about ₹431 lakh crore in the previous session, making investors poorer by about ₹6 lakh crore in a single session.

The Sensex opened at 77,711.11 against its previous close of 77,578.38 and dropped 1 per cent to the level of 76,802.73. The index finally closed 0.54 per cent down at 77,155.79. 

On the other hand, the Nifty 50 opened at 23,488.45 against its previous close of 23,518.50 and fell over a per cent to 23,263.15. It closed with a loss of 0.72 per cent at 23,349.90.

The BSE Midcap and Smallcap indices ended 0.37 per cent and 0.67 per cent lower, respectively. 

Sectoral indices today

Most sectoral indices ended with losses on the NSE, with Nifty PSU Bank cracking nearly 3 per cent, followed by Nifty Metal and Media indices which fell over 2 per cent each.

However, Nifty Realty climbed about 1 per cent and Nifty IT ended with a gain of half a per cent. 

5 key factors driving the market down

Both key indices had clocked modest gains in the previous session on Tuesday. However, they resumed their downward march on Thursday on lingering concerns over weak earnings, geopolitical tensions, and stretched valuation. The US indictment of Adani Group Chairman Gautam Adani and other senior executives on bribery charges dealt a fresh blow to sentiment.

Let's take a look at the key factors behind the market selloff.

1. The Adani saga

Several Adani Group shares hit their lower circuits in early trade on Thursday after Gautam Adani was indicted in New York over his role in an alleged multibillion-dollar bribery and fraud scheme.

According to US authorities, more than $250 million in bribes were promised to Indian Government officials to secure solar energy contracts. Shares of Adani Enterprises and Adani Ports plunged 23 per cent each on BSE. Both stocks ended as top losers in the Nifty 50 index.

2. Concerns over weak Q2 earnings

Q2 earnings came out significantly weak. The July-September quarter numbers of the majority of companies disappointed markets.

As a Mint report highlighted, the combined revenue of the 2,996 BSE-listed companies that were part of the analysis rose 8.1 per cent year-on-year (y-o-y), slower than 9.5 per cent in Q1. As a result, net profit growth slowed to 8.9 per cent from 9 per cent. The banking, financial services, and insurance (BFSI) sector was again a saving grace: without it, revenue growth decelerated to 4.6 per cent from 6.3 per cent, and net profit growth edged up from 3.3 per cent to a still-dismal 4.4 per cent.

"Global cyclicals, such as oil and gas, along with metals, cement, chemicals, and consumers, weighed on earnings growth. Consumption has emerged as a weak spot, while select segments of BFSI are experiencing asset-quality stress. Weakness in government spending has also been one of the factors driving moderation in earnings," Sneha Poddar, VP of research and wealth management at Motilal Oswal Financial Services, observed.

3. Escalating geopolitical tensions

Fresh escalation in the Russia-Ukraine war has soured the market mood further. Russian President Vladimir Putin signed a revised nuclear doctrine on Tuesday, days after the US allowed Ukrainian use of longer-range missiles against Moscow.

“The escalation of tensions in the Ukraine-Russia war can weigh on markets. The element of uncertainty caused by the escalations is high, and therefore, most market participants are likely to be in a wait-and-watch mode. However, any sharp slide in the market appears unlikely since the mother market, the US, has largely downplayed the escalation,” said V K Vijayakumar, Chief Investment Strategist, Geojit Financial Services.

4. Heavy foreign capital outflow

Foreign portfolio investors (FPIs) have been relentlessly selling Indian equities, which has been among the key reasons behind the recent market downtrend.

According to NSDL data, FPIs sold Indian stocks worth ₹94,017 crore in October, and they sold stock for an additional ₹25,942 crore in November till the 19th.

5. Technical factors

The Nifty 50 is trading below its 200-DMA of 23,575. Experts say the market texture is weak, and the levels of 23,100-22,800 are crucial.

"23,100 and 22,800 are the levels toward which Nifty is slowly sliding. At the same time, we have seen buying emerging from the 23,300 level. As long as this level is sustained, we may see some pullback," said Anand James, Chief Market Strategist at Geojit Financial Services.

Ajit Mishra, SVP of research at Religare Broking, pointed out that the broader indices are also under pressure but are currently finding support near their long-term moving average, the 200-day exponential moving average (DEMA).

"Traders are advised to adopt a cautious stance and prioritise a hedged approach to navigate the current market conditions. 22,700-23,100 is the key support zone, while 23,800-24,200 is the key resistance zone for the index," said Mishra.

Shrikant Chouhan, the head of equity research at Kotak Securities, said the current market texture is weak but oversold.

"For the traders now, 23,350 and 23,400 would be the key levels. Above 23,400, we could see one quick relief rally till 23,500-23,550. On the flip side, below 23,250, selling pressure is likely to accelerate. Below the same market could slip till 23,175-23,150," said Chouhan.

"The index remained below the 200-DMA, indicating persistent weak sentiment in the market. The RSI indicator has reentered a bearish crossover, further supporting the negative sentiment. In the short term, sentiment remains weak, with support at 23,200. A fall below this level could trigger a correction in the market. On the upside, resistance is placed at 23,550; a decisive move above this level might induce a rally in the market," said Rupak De, Senior Technical Analyst at LKP Securities.

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Disclaimer: The views and recommendations above are those of individual analysts, experts, and brokerage firms, not Mint. We advise investors to consult certified experts before making any investment decisions.