The Indian stock markets experienced a sharp decline on Wednesday, with all sectoral indices trading in the red. Key sectors such as banking, financial services, FMCG, IT, and realty witnessed significant losses.
Investor nervousness can be attributed to several factors, primarily the anticipation of the US Federal Reserve’s policy announcement scheduled for the day. Investors are closely watching for the possibility of the US Fed keeping interest rates unchanged, especially in light of recent economic data.
Profit booking also played a role in the market sentiment, leading to substantial declines in major stocks, including HDFC Bank and Reliance. Other prominent banking companies like Kotak Mahindra Bank and ICICI Bank also saw their shares fall.
Financial services firms experienced a similar downward trend, with stocks of HDFC Life, ICICI Prudential Life Insurance, SBI Cards, and SBI Life declining by well over 1 percent.
Parth Nyati, Founder at Tradingo, explained that the profit booking observed in both the Nifty and Sensex was largely influenced by HDFC Bank’s sharp sell-off following its analyst meeting. Concerns were raised during the meeting regarding potential margin pressure and asset quality post the merger of HDFC twins.
Nyati also pointed to caution in global markets ahead of the Federal Open Market Committee (FOMC) meeting. Factors like rising US bond yields, rupee depreciation, surging crude oil prices, and selling by foreign institutional investors (FIIs) contributed to the challenges faced by the Indian markets.
From a technical perspective, Nyati noted that Nifty and Sensex have identifiable immediate support levels at 19,900 and 66,900, respectively. If these levels are breached, additional profit booking could lead to levels of 19,640 for Nifty and 66,000 for Sensex.
