Sensex, Nifty: 5 Reasons why Stock Market Down

The Indian stock market faced significant pressure today as Sensex and Nifty experienced sharp declines. Broader market indices also suffered, with several stocks hitting their lower circuit limits. Here are the five key reasons driving the downturn:

1. Rising Fears Around Human Metapneumovirus (HMPV):

Two cases of human metapneumovirus (HMPV) have been detected in India, sparking concerns among investors. The respiratory virus, which has been a significant challenge for China, has no known vaccine. This news has heightened uncertainty in the market, leading to risk aversion.

2. Record Low Rupee Value:

The Indian rupee tumbled to a historic low of 86 against the US dollar, intensifying fears of Foreign Portfolio Investor (FPI) outflows. FPIs have already sold equities worth Rs 4,285 crore in January so far, further dampening investor sentiment.

3. Weak Global Cues:

Global markets provided little relief as Asian indices fell up to 1.4 per cent due to a strong US dollar, rising bond yields, and crude oil prices reaching their highest levels since October 2024. These factors contributed to the negative sentiment in the Indian markets.

4. ITC’s Demerger of Hotel Business:

ITC shares were quoted at Rs 452, reflecting adjustments for the demerger of its hotel business. The adjustment was more significant than analysts had anticipated, contributing to the decline in large-cap indices. ITC’s performance had a notable impact on both Sensex and Nifty.

5. Sector-Specific Declines:

HDFC Bank: Shares fell 1.56 per cent to Rs 1,722 due to a sequential decline in corporate loans for the third consecutive quarter.

Tata Steel: The stock dropped 3.62 per cent to Rs 133.20.

Other Declines: Key stocks like Kotak Mahindra Bank, Power Grid, Asian Paints, Adani Ports, Mahindra & Mahindra, and IndusInd Bank saw losses exceeding 2 per cent each.

Key Market Data: Nifty: Down by 413.15 points (1.72%) to 23,591.60.

Sensex: Slipped below the 80,000-mark, trading at 77,992.30, down 1,231 points (1.55%).

Smallcap & Midcap Indices: Declined up to 3%.

Analyst Views:

V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services, stated that the external macroeconomic environment remains unfavorable. High US bond yields and a strong dollar index (at 109) are likely to prompt continued FII selling until these stabilize. However, domestic resilience in certain sectors, such as auto sales, may provide support during market declines.

CLSA’s January 3 strategy note highlighted shifts in its India focus portfolio, adding Tata Motors, NTPC, Nestle India, and Britannia while removing HDFC Bank. The firm also reduced its overweight on banks and maintained underweight positions in IT, discretionary, industrials, and healthcare sectors.

Outlook:

With a mix of global and domestic factors weighing heavily on market sentiment, investors are advised to tread cautiously. Analysts predict that while short-term challenges persist, selective buying in resilient sectors could provide opportunities in the coming months.