Stock market today: Sensex drops 426 points, Nifty 50 ends below 24,400; 6 key reasons why market fell

Indian stock market indices ended around half a percent lower each on Wednesday dragged by profit booking at higher levels. The Sensex plunged 426.87 points, or 0.53, to close at 79,924.77, while the Nifty 50 ended 108.75 points, or 0.45%, lower at 24,324.45.

During the session, Sensex hit a record high of 80,481.36, while Nifty 50 reached the peak of 24,461.05. However, as selling intensified, Sensex crashed 1,045 points from the day's high to hit an intraday low level of 79,435.76. Nifty 50 also recorded a life-time high of 24,461.05 in the early trade, but plunged 319 points from there and touched an intraday low of 24,141.80.

Meanwhile, Bank Nifty index also closed lower by 379.50 points, or 0.72%, lower at 52,189.30. The index hit a high of 52,528.80 and a low of 52,075.40 during the day.

Among sectoral indices, Nifty Auto, Nifty PSU Bank, Nifty IT and Nifty Metals fell the most. Selling was witnessed in the broader markets as well. The Nifty Smallcap 100 declined 0.88% and the Nifty Midcap 100 fell 0.27%.

Profit booking at higher levels ahead of the upcoming Q1 results season amid concerns over stretched valuations, and mixed global market cues weighed on investor sentiment.

“Investors should be careful about the high level of speculative activity in the Smallcap space where operators are driving up the prices of many shares with low floating stock,” said V K Vijayakumar, Chief Investment Strategist, Geojit Financial Services.

On the technical front, Nifty breached a major downside support of 24,300 level.

Shrey Jain Founder and CEO SAS Online noted the continued underperformance of Bank Nifty relative to Nifty.

“For today’s weekly expiry, we expect Bank Nifty to consolidate around the 52,500 level, However, a pullback towards 52,250 could present a buying opportunity. We can await any directional move that may arise from news events. A decisive break in either direction is likely to lead to trending moves,” said Jain.

Here are key reasons why stock market is falling today:

Mixed global cues

Asian markets were mixed despite overnight gains on Wall Street after dovish comments from the US Federal Reserve Chairman Jerome Powell. Market participants focused on inflation data from Japan and China.

China’s consumer price inflation rose by 0.2% in June from a year ago, while producer prices dropped by 0.8% from a year ago, in line with expectations. Japan’s wholesale inflation accelerated by 2.9% in June from a year earlier.

Profit Booking

Investors opted for profit booking in the stock market after both the benchmarks saw a strong run. The Sensex hit a record high of 80,481.36 in the early morning trade today, July 10, and the Nifty 50 also touched a record high of 24,461.05. Inflated valuations in the market prompted investors to book profits in in overvalued stocks.

Rate Cut Uncertainty

Rising uncertainty over interest rate cut by the US Federal Reserve this year weighed on the stock market. US Fed Chair Jerome Powell, in his testimony before the Congress struck a cautious tone on how soon rate cuts would come.

Powell said a rate cut is not appropriate until the Fed gains “greater confidence” that inflation is headed toward the 2% target.

“We are well aware that we now face two-sided risks,” and can no longer focus solely on inflation that nevertheless still “remains above” the central bank’s 2% target, Powell told the Senate Banking committee.

Domestic Inflation Concerns

Investor sentiment was also hurt by concerns over rising domestic inflation, India’s Consumer Price Index (CPI)-based inflation, or the retail inflation, for June is expected to rise.

According to analysts, CPI inflation is likely to edge up to 5% in June from 4.75% in May due to rising food prices, primarily on account of high vegetable prices. Core CPI inflation is seen bottoming out, but it is likely to remain muted at 3.2% in June.

Q1 Results

Q1 results of India Inc are expected to be sombre. Nifty 50’s net profit is estimated to decline sequentially. According to Kotak Institutional Equities, Q1FY25 net profits of the BSE-30 index may increase 8.1% year-on-year (YoY) but decline 8.4% quarter-on-quarter (QoQ). For the Nifty 50 index, it expects PAT to be flat YoY but decline 10.7% QoQ.

The brokerage firm estimates EPS (earnings per share) of the Sensex index at ₹3,521 for FY25 and ₹4,063 for FY26. It expects the Nifty 50’s EPS at ₹1,093 and ₹1,249 for FY25 and FY26, respectively.

Technical View

Rajesh Bhosale, Equity Technical Analyst, Angel One believes the market appears overbought by various measures.

“Therefore, we advise against aggressive long positions. Key levels to watch are 24,600 - 24,650, the golden ratio retracement of the panic fall seen during the election day results. On the downside, immediate support is at 24,330 followed by 24,160,” he said.

Rahul Ghose, CEO of Hedged.in noted that throughout the session Nifty spot traded below the day’s opening range, which was at 24,383 to 24,461, indicating the market was in the grip of bears. 

“We have mentioned that markets have a limited upside from these levels from a risk to reward perspective and today’s engulfing pattern on the Index might cause a small correction if yesterday’s low is broken in the follow through tommorrow. Sectoral churning and the anticipation of government spending benefiting certain sectors, decides the momentum and the direction in the pre-budget period,” Ghose said.

The increased writing of the Call OI (Open Interest) at 24,300 levels indicates that Nifty is likely to face resistance around this level in this weekly expiry. The PCR opened at 1.12 and dropped to test 0.61, indicating the index has a bearish bias in this weekly expiry, he added.

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.