Stock markets today: Nifty 50 closed with a loss of 338 points, or 1.51 per cent, at 21,997.70 while the Sensex settled with a loss of 906 points, or 1.23 per cent, at 72,761.89.
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The Indian stock market witnessed a selloff today, with both the Nifty 50 and the Sensex tumbling over 1%. This decline comes on the heels of the US releasing its February inflation data, which showed a slight increase. This has sparked concerns that the US Federal Reserve might delay its plans to cut interest rates past June, impacting global markets, including India.
The Nifty 50 opened at 22,432.20 against the previous close of 22,335.70 and fell 1.9 per cent to hit its intraday low of 21,905.65. The index closed with a loss of 338 points, or 1.51 per cent, at 21,997.70.
Stock markets Indian Stocks Tumble: Key Factors Behind the Market Dip
The Indian stock market experienced a significant decline today, with both the Sensex and Nifty 50 falling by over 1%. Let’s delve into the potential reasons behind this market movement:
- Global Cues: Markets worldwide, including India, took a cautious stance ahead of crucial US inflation data scheduled for release tomorrow. This data could influence the Federal Reserve’s interest rate decisions, impacting global market sentiment.
- Selling Pressure in Heavyweights: Selling activity intensified in key index-heavyweight stocks, like HDFC Bank, Reliance Industries, and ICICI Bank. This significant selling contributed heavily to the downward trend.
- Tata Stocks Stall: Anticipation surrounding the much-awaited Tata Sons IPO seems to have faded, leading to a decline in Tata Group stocks, including Tata Steel and Tata Motors. This further weighed on the market.
- Profit Booking: With recent gains, some investors might have opted to book profits, especially after a strong market run. This profit-taking activity can contribute to a temporary market decline.
Remember, these are just some of the possible reasons. Stock markets are complex systems influenced by various factors.
1. Stock Markets India Pullback: Valuations Take Center Stage
The Indian stock market is facing a correction after a strong run since November. This surge has pushed valuations, especially in the small-cap segment, to potentially unsustainable levels. Experts are expressing concern about a “bubble zone” forming, fueled by retail investor enthusiasm rather than market fundamentals.
“The recent surge in valuations, particularly among smaller companies, driven by overenthusiastic retail investors, has been a cause for worry for months now,” said V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services.
2. Indian Stock Markets Face Consolidation After Frothy Run
The Indian stock market, after a buoyant period since November, seems to be undergoing a phase of consolidation. This comes amidst concerns over stretched valuations, particularly in the small-cap segment. The lack of fresh positive triggers to sustain the upward momentum has also contributed to this pullback. Investors are likely reassessing valuations and potentially taking profits after the recent strong run.
3. Rate cut conundrum
The US inflation rose more than expected in February, sparking worries that the interest rate cuts by the US Federal Reserve may be delayed. This boosted the dollar index, and even the US stock market surged. However, the domestic market seems to view this negatively because prolonged high-interest rates could deter foreign capital inflows into emerging markets like India, affecting them adversely.
“Delayed Rate Cuts might lead to Indian Markets being impacted negatively. This is because we may see many FIIs taking out money from the Indian markets and investing in their own country as they are receiving investment returns at higher percentages which would further widen the interest rate gap between Indian and the US,” Hemant Sood, Managing Director of Findoc told Mint.
4. The impact of domestic macro numbers
India’s retail inflation for February did not show remarkable improvement and came near the previous month’s level while the factory output prints for January came weaker-than-expected.
Also Read: February inflation remains steady at 5.1% but food inflation up
As Mint reported earlier, India’s consumer price index (CPI) – based inflation eased to a four-month low of 5.09 per cent in February 2024, against 5.1 per cent in January while India’s industrial output growth stood at 3.8 per cent in January, unchanged month-on-month.
Also Read: Factory output: India’s industrial production at 3.8% in January