Indian stock market witnessed a bearish trend in the opening bell of Monday, November 18, 2024. The Sensex fell by as much as 565 points hitting an intraday low of 77,015.71, while Nifty 50 plunged by a little over 170 points to record the day's low of 23,532.70. The Bears bandwagon has continued in the market for the seventh consecutive day. Among the key reasons for the decline are downgrades in major stocks for FY25, coupled with consistent foreign investor outflow, and the cautiousness ahead of Trump's policies. The dollar is up and so is treasury yield, leaving little to no room for reversal in FIIs stance on equities. The Indian stock market also shrugged off global brokerage CLSA's shift from China to India and its 20% overweight increase in the latter.
Sensex, Nifty On November 18:
Sensex is currently trading at 77,266.27, down by 314 points, recovering slightly from their early losses. In the early trade, Sensex had nosedived by 170 points to hit an intraday low of 77,015.71.
Further, Nifty 50 dipped by 53.55 points or 0.23% to trade at 23,479.15. In the early trade, the benchmark shed at least 170 points to hit an intraday low of 23,362.35.
Top Bulls: Stocks like Hero MotoCorp, Hindalco, HDFC Bank, Coal India, and Adani Ports emerged as top gainers, rising by 1% to 4.5%.
Top Bears: However, stocks like Wipro, Dr Reddy's Lab, Infosys, TCS, and Tech Mahindra emerged as top losers, declining by 2% to 3.5%.
Dr. V K Vijayakumar, Chief Investment Strategist, Geojit Financial Services said, relentless FII selling, earnings downgrades for the majority of stocks for FY25, and the consequences of the Trump trade are weighing on the market.
Along similar lines, Prashanth Tapse, Senior VP (Research), Mehta Equities said, the bearish sentiment prevails as FIIs pulled out Rs 29,533 crore in November, bringing the total outflow to Rs 1.25 lakh crore since Nifty's peak in September. With Nifty slipping below its 200-DMA and down 10% from its high, the market looks vulnerable to further downside. Weak leads from Wall Street and rising US bond yields add to the anxiety.
7 Key Factors That Dragged Stock Market:
1. IT Stocks In Bloodbath:
Nifty IT index nosedived by as much as 1,008.40 points or 2.4% to trade at 41,382.45, which was near its day's low of 41,153.50. All IT stocks on the index were in red with a downside of 1% to 3.5%. The top losers were LTIMindtree, Wipro, TCS, Infosys, Tech Mahindra, Coforge, L&T Tech Services, and HCL Tech.
2. Oil & Gas Stocks Downfall:
Amidst the cut in AGM natural gas allocation, Indian natural gas companies are seeking a CNG price hike. Share Prices of Indraprastha Gas and Mahanagar Gas are in a free fall by 15% to 20%. Nifty Oil & Gas index shed 173 points or 1.6% to trade at 10,637.15. Stocks like Gujarat Gas and Adani Total Gas also shed 6% each. OMCs including BPCL, GAIL, Reliance and Indian Oil were in the red by 1% to 3%.
3. Smallcap Stocks Lose Steam:
BSE Smallcap also dropped by 331.34 points or 0.60% to trade at 52,070.09. In the early trade, however, the index erased its 52000 mark and touched the day's low of 51,565.04. Stocks like Honasa Consumer, Mahanagar Gas, Sanghvi Movers, Honda Power, and Tega Industries dropped by 10% to 20%.
4. Crude Oil Prices:
In the early trade of Monday, crude oil prices climbed mildly with Brent Crude crossing at 71.334 per barrel, up by 0.43%m while US WTI crude oil surged by 0.3% to 67.196 per barrel. The crude prices halted their previous losing streak as conflict between Russia and Ukraine heightened, fuelling fear of potential supply chain disruptions.
As per Trading Economics, Over the weekend, Russia unleashed its largest air strike on Ukraine in almost three months, further hobbling an already damaged energy system. Allies are reportedly encouraging Ukrainian President Volodymyr Zelenskyy to consider new strategies for engaging Russian President Vladimir Putin in negotiations to bring an end to the conflict. Meanwhile, concerns about weakening demand in China, the world's largest oil importer, have contributed to bearish sentiment in the market. Additionally, a stronger US dollar, supported by expectations of a slower pace of Federal Reserve rate cuts, weighed on prices.
5. Q2FY15 Earnings Dull:
As per Motilal Oswal's data, the 2QFY25 corporate earnings scorecard was weak, but excluding commodities, it has reported an in-line earnings growth. Consumption has emerged as a weak spot, while select segments of BFSI are seeing asset-quality stress. The weak government spending (flat in 1HFY25 YoY) along with excess rainfall also impacted demand.
Data from Motilal highlighted that, Nifty delivered a 4% YoY PAT growth (versus its estimates of +3%). Nifty reported a single-digit PAT growth for the second successive quarter since the pandemic (Jun'20). Five Nifty companies - SBI, Hindalco, ONGC, ICICI Bank, and Axis Bank - contributed 140% of the incremental YoY accretion in earnings. Conversely, BPCL, JSW Steel, Coal India, IndusInd Bank, and Reliance Industries contributed adversely to the earnings.
6. Asian Market:
On Monday, Asian stocks broadly traded mixed as expectations of rate cuts from the US Federal Reserve turned bleak following new signs of resilience in the US economy while awaiting Donald Trump's policies. The Japanese Nikkei 225 slipped by nearly 1%, while Hang Seng Index and Shanghai Composite surged by over 1% each, and also Australia's S&P/ASX 200 was up marginally. South Korea's KOSPI index outperformed with gains of more than 2% ahead of Samsung's buyback plan.
7. Dollar, Treasury Yields:
On November 18 so far, the dollar index traded steady and close to its highest level in 2 years, to 106.6. As per the Trading Economics report, stronger-than-expected reports on retail sales and inflation further supported a hawkish outlook on Fed policy. While markets still expect a quarter-point rate cut in December, expectations for rate reductions through late 2025 have been scaled back to 77 basis points, down from over 100 basis points just a few weeks ago.
Meanwhile, the US 10-year benchmark treasury yield stayed near its highest level since June 20 4.45%, and the Indian 0-year government bond rebounded from their 3-week low to perform at 6.85%. RBI continues to be less dovish and more hawkish.
What Should Investors Do?
To investors, Vijayakumar recommended that they can focus on areas of strength like digital companies and high-quality banking stocks.
Whereas Tapse said "Our preferred trades include selling Nifty at CMP with targets of 23,450/23,167 and Bank Nifty targeting 49,700/49,283. Stocks like Axis Bank, Voltas, NMDC, and REC remain bearish on any intraday strength. Sell REC at CMP (502) with targets of 484/451; aggressive target at 408."
Additionally, Mandar Bhojane, Research Analyst at Choice Broking said, traders are advised to remain cautious and closely monitor global market developments. Key resistance levels should be observed for potential breakouts, while downside risks may continue to materialize if support levels are breached.
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