The Indian stock market is sailing through rough waters on July 18 as weak quarterly earnings, subdued global cues and continuous foreign outflows have delivered a triple whammy on investor sentiment. Buckling under these pressures, the Sensex nosedived nearly 600 points while the Nifty 50 breached the psychological 25,000 mark.
The Sensex plunged 630.98 points, or 0.76%, to hit an intraday low of 81,628.26. The Nifty wasn’t far behind, sliding 186.2 points, or 0.74%, to 24,925.25.
The onset of the Q1 earnings season has done little to lift spirits. Apart from a few bright spots, most corporate results have been tepid or outright disappointing. IT giants like TCS and HCLTech had already underwhelmed the Street. The latest in the list was Axis Bank that reported not just a 3% drop in its net profit but also spooked brokerages with its margin pressures and deteriorating asset quality.
Consequently, shares of Axis Bank took a sharp blow in today’s session, plunging as much as 6%. The rub-off of this selloff was also felt across other financial stocks like Kotak Mahindra Bank, Shriram Finance, SBI Life and HDFC Life, all of which flooded the list of laggards on the Nifty 50.
“Leading private sector banks are in a defensive mode now. The market is discounting NIM compression in the Q1 results. But this will reverse from Q3 onwards making them good buys now,” said VK Vijayakumar, Chief Investment Strategist, Geojit Investments.
Meanwhile, the benchmark banking index, Nifty Bank also dived over 1%, also weighing on market sentiment.
To add to the gloom, global markets failed to provide any comfort. Asian markets such as Japan and South Korea also closed lower, and Indian equities followed suit. Rising scepticism about the earnings season’s trajectory, particularly after initial setbacks has triggered a risk-off mood. The shift was clearly reflected in the India VIX, which surged 4%, signalling heightened market anxiety.
"There are no triggers for the market to break out of the consolidation range in which it has been stuck for two months now. Even an India-US interim trade deal has been discounted by the market, leaving no scope for a sharp rally decisively breaking the range,” Vijayakumar added.
On another noted, foreign institutional investors stuck to their selling spree, offloading shares worth Rs 3,694.31 crore in the last session, hinting towards profit taking on their part. However, its not just FIIs, the larger mood of the market seems to be inclined towards a ‘sell-on-rise’ sentiment. Infact, in the absence of triggers, analysts also suggest investors to use any spikes in the market as an opportunity to sell.
From a technical standpoint, Shrikant Chouhan, Head of Equity Research at Kotak Securities, pointed to the formation of a small candle on the daily chart, a sign of indecision between bulls and bears amid muted intraday activity.
“We believe 25,100cwill remain a key support zone for traders. As long as the market remains above this level, the bullish trend is likely to persist. On the upside, the market could bounce back to the 20-day SMA (simple moving average) or 25,350,” Chouhan said. “Further upside could even take the market to 25,500.”
On the downside, Chouhan sees the Nifty slipping much deeper if ends the session below its 50-day simple moving average of around 25,000 points.
