In today’s trading session, the Indian stock market witnessed a decline, with the Nifty 50 and Sensex both falling by about 1% each during morning trade on January 25. This comes after a previous day of strong gains, as profit booking in various stocks prompted a downward correction.
The Nifty 50 opened flat but soon dropped nearly 1%, reaching a day’s low of 21,247.05, while the Sensex, after opening lower, fell over 1% to touch a low of 70,319.04. As of 1:20 pm, the Sensex was down by 0.91% at 70,412.12, and the Nifty 50 was down by 0.78% at 21,286.65.
The market’s decline was broad-based, with most sectoral indices in the red. Nifty Bank, IT, Pharma, and Financial Services indices all experienced losses of over 1%. Meanwhile, the BSE Midcap index was down by 0.61%, and the Smallcap index managed a 0.35% gain.
Reasons Behind Market Fall:
Valuation Concerns: Market experts highlight a lack of valuation comfort as a primary reason for the market’s inability to sustain gains. Recent sharp increases in mid and smallcap stocks have led to high valuations, posing a potential risk.
Sustained Selling by Foreign Portfolio Investors (FPIs): Foreign portfolio investors have been actively selling Indian equities in January, amounting to ₹19,308 crore so far. Rising US benchmark bond yields and diminishing optimism about rate cuts are contributing to FPIs’ cautious stance.
Caution Ahead of Central Bank Meetings: Investors are adopting a cautious approach in anticipation of key central bank meetings. The European Central Bank (ECB) meeting is scheduled, with expectations that it will maintain current interest rates. Additionally, the US Fed’s policy meeting on January 30-31 is awaited, where investors will closely watch for cues on potential rate cuts.
Profit Booking in Banking and IT Stocks: Heavyweight stocks in the banking and IT sectors, including HDFC Bank, Axis Bank, Tech Mahindra, TCS, and HCL Tech, experienced strong profit booking. The weak Q3 earnings of these sectors contributed to the selloff.
Other Contributing Factors: Persisting geopolitical tensions and caution ahead of the Interim Budget are also influencing domestic market sentiment.
In summary, a combination of valuation concerns, FPI selling, caution around central bank meetings, profit booking in key sectors, and geopolitical factors are contributing to the current decline in the Indian stock market. Investors are closely monitoring global economic indicators for insights into future market trends.
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