After a long record-setting run, signs of investor fatigue were palpable in the equity markets on Tuesday amid profit-booking, lack of fresh triggers and mounting tensions in the Red Sea.
Both Sensex and Nifty50 ended in the red, and selling was seen in stocks from the auto, private banking, capital goods, IT and realty sectors. Their respective sectoral indices saw over 1 per cent decline on Tuesday.
The Sensex ended the session at 71,892, down 379 points or 0.53 per cent. The Nifty 50 ended at 21,666, dropping 76 points or 0.35 per cent. For both indices, Tuesday’s fall was the sharpest since December 20.
Now, the Sensex is 0.9 per cent away from the all-time intraday high it hit on Monday and the Nifty50 is 0.7 per cent far. While the two indices ended in the red in the last trading session of 2023, they closed with modest gains on January 1.
ICICI Bank, which declined 1.9 per cent, contributed the most to Sensex’s decline, followed by Larsen and Toubro, which fell 2.4 per cent. Kotak Mahindra Bank slipped 2.4 per cent and contributed to the decline.
“The fall in private lenders may be due to normal sectoral rotation or profit-taking. Auto stocks fell as monthly sales numbers were below par. The day-on-day gains in index stocks are slowing amid investor fatigue after the stellar gains last year. We need fresh triggers for the next up-move,” said Deepak Jasani, head of retail research of HDFC Securities.
Reliance Industries, which gained 0.87 per cent, Sun Pharma, which rose 2.9 per cent, and Bajaj Finance, which gained 1.9 per cent, provided some comfort and helped prevent further losses.
In 2023, the Sensex gained 18.7 per cent, and the Nifty50 rose 20 per cent, with most gains coming in the last two months of the year. In November and December, the Sensex gained 13 per cent and the Nifty rose 14 per cent.
The uptick came on the back of the US Federal Reserve’s dovish pivot. Investors have been betting on rate cuts as early as March ever since the Fed, in its December meeting, indicated that it expects to cut rates at a more robust pace than what was projected earlier. The latest state election results raised bets for policy and regime continuity, and strong macroeconomic numbers further enthused investors.
With investor fatigue, according to analysts, appeared to be setting in, rising tensions in the Red Sea acted as another drag. The Brent crude rose 2 per cent and was trading at $78.56 per barrel at 7 pm IST. Oil prices rose after Iran dispatched a warship to the Red Sea in response to the US Navy destroying three Houthi boats.
Market experts warned that tensions in the Red Sea, if not contained, could end up pushing commodity prices and posing a challenge to rate cut plans of major central banks.
Higher oil prices will also hurt India, which imports over 70 per cent of its crude oil requirements. News reports suggested that the Red Sea handles about 12 per cent of the world’s commerce.
“The markets had a good run but tensions in the Red Sea are now keeping investors worried. There could be a bit of worry around some additional measures by the RBI with regards to lending to AIFs,” said Andrew Holland, CEO of Avendus Capital Public Markets Alternate Strategies
Among peer markets, Chinese equities declined sharply after weak manufacturing and home sales data. China’s factory activity in December fell to the lowest level in six months; the decline in home sales accelerated.
Domestic institutional investors were net sellers to the tune of Rs 1,959 crore, provisional data from exchanges revealed. Foreign portfolio investors (FPIs) were net buyers worth Rs 1,602 crore.
The market breadth was neutral, with 1,906 stocks advancing and 1,904 declining. More than two-thirds of Sensex stocks fell.
First Published: Jan 02 2024 | 11:49 PM IST
