Sensex Down 450 Points, Nifty at 23,644; Tomorrow Nifty Prediction

Tomorrow Nifty Prediction

Sensex and Nifty Close Lower Amid FIIs Selling and Weak Market Sentiment: What to Expect on 31st December

Indian stock markets ended on a negative note, continuing their recent downtrend as the combined pressures of sustained foreign institutional investor (FII) selling, weakening global cues, and the depreciating rupee weighed heavily on market sentiment.

Both the Sensex and Nifty witnessed significant losses, reflecting a broader cautious outlook in the market as it heads toward the year-end.

Market Performance: A Closer Look

• Sensex Performance: The BSE Sensex closed at 78,248.13, shedding 450.94 points, or 0.57%, marking a bearish session for the index.
• Nifty Performance: The Nifty 50 ended at 23,644.90, down by 168.50 points, or 0.71%, reflecting a similar negative sentiment.

These declines were in line with a market where 2,460 stocks declined, 1,368 rose, and 140 remained unchanged, signaling a broad-based selloff.

A closer inspection of the market dynamics shows that the selling pressure is being exacerbated by factors such as continuous outflows from FIIs and a weaker-than-expected global economic environment.

Key Factors Driving Market Weakness

1. Sustained Selling by Foreign Institutional Investors (FIIs)

One of the primary reasons for the continued weakness in Indian equities has been the persistent selling by foreign institutional investors (FIIs).

FIIs, who have been net sellers for several months now, have played a critical role in pressuring the market.

This trend has been linked to a variety of factors, including rising global interest rates and geopolitical uncertainties that have led investors to reallocate their funds into safer or higher-returning assets outside India.

According to Mandar Bhojane, a Research Analyst at Choice Broking, the market has become less attractive to FIIs, primarily due to the depreciation of the Indian rupee.

As the rupee continues its fall, now nearing 86 per dollar, foreign investors see their returns in rupee terms diminishing when translated into dollars.

This has made Indian equities less appealing, resulting in continued outflows. FIIs’ reluctance to invest in Indian markets has placed significant pressure on the broader indices.

2. Weakening Indian Rupee

The Indian rupee’s decline against the dollar is another crucial factor contributing to the market’s sluggish performance.

The rupee’s fall below the 86 mark per US dollar has not only made imports more expensive but also discouraged foreign investors who now face the prospect of lower returns on their investments.

As foreign investors seek better opportunities in other emerging markets or more developed economies with stronger currencies, the Indian stock market continues to bear the brunt of this outflow.

In addition to FIIs pulling back, the rupee’s depreciation has increased inflationary pressures in India, making it more difficult for companies to maintain profit margins, particularly in the case of import-heavy sectors like energy, infrastructure, and automobiles.

3. Weak Global Cues

Global markets are also contributing to the pessimism in Indian equities. The uncertainty surrounding global economic growth, particularly in major economies like the US and China, has led to caution among investors worldwide.

Geopolitical tensions, along with concerns about inflation and tightening monetary policies, have added to the risk-off sentiment.

This has led to heightened volatility across global markets, with investors seeking safer assets like gold and government bonds.

These global headwinds have a direct impact on the Indian market, given that India’s financial markets are deeply interconnected with global financial systems and sensitive to international capital flows.

Sectoral Performance: Broad-based Weakness

Most major sectors closed in the red, mirroring the negative trend in the broader market. However, some sectors managed to perform better than others:

• Nifty Auto Index: The Nifty Auto index was the worst performer today, registering the biggest loss among the sectoral indices. Weak demand, especially in the global automotive space, has put significant pressure on automakers in India. The drop in domestic sales amid rising input costs has led to a pessimistic outlook for the sector.
• Nifty Bank Index: The Nifty Bank index also witnessed a decline, contributing to the overall market weakness. While banks have been benefiting from the ongoing interest rate hikes, concerns about asset quality and a potential slowdown in loan growth amid economic uncertainty are dampening investor sentiment.
• Energy, Infra, and IT: Other sectors, including Energy, Infrastructure, and Information Technology (IT), also faced declines. These sectors are typically sensitive to macroeconomic factors like inflation, interest rates, and global economic growth, all of which are currently under pressure.
• Pharma and IT: On the flip side, the Pharma and IT sectors managed to show resilience. Pharma stocks, in particular, benefited from increased demand for healthcare products and services, while IT stocks continued to see some interest due to the sector’s growth prospects despite global economic uncertainty.

Stock Specific Performance

• Top Gainers: Among individual stocks, Adani Enterprises was the standout performer, rising by about 8%. Other significant gainers included Shriram Finance and HCL Technologies, which benefited from a combination of strong fundamentals and sector-specific growth drivers.
• Top Losers: On the other hand, stocks like Hindalco, Wipro, Tata Motors, Hero MotoCorp, and JSW Steel suffered considerable losses. These stocks were hit by a combination of weak demand, margin pressures, and the broader market sell-off.

Prediction for 31st December

Looking ahead to 31st December, the market is expected to remain under pressure as the year draws to a close.

According to Anand James, Senior Analyst at Geojit Financial Services, the overall momentum is likely to remain subdued in the short term.

Key levels to watch on the Nifty are 23,750, which could act as a downside support level. However, if the index breaches the 23,600 mark, further weakness could ensue, potentially leading to more significant corrections.

Moreover, as we enter the final phase of the year, market volatility could intensify. Investors will be closely monitoring data releases, such as monthly auto sales and the December quarter earnings results, to gauge the strength of the economic recovery and corporate performance in the coming months.

These indicators will likely provide critical insights into the direction of the market in early 2024.

Final Remarks: Cautious Outlook for the Market

In conclusion, the Indian stock market faces several headwinds as we approach the end of 2024. The persistent FII selling, coupled with the rupee depreciation and weak global cues, is likely to keep sentiment subdued.

While some sectors like Pharma and IT may continue to attract interest, the broader market is expected to remain under pressure.

Investors should brace for heightened volatility and monitor key economic data and corporate earnings reports in the coming weeks for any signs of stabilization or further weakness.

As the market navigates these challenges, it is crucial for investors to remain cautious and stay informed about global and domestic developments that could impact the market’s trajectory in the near term.