Are the Bears Taking Control? Unraveling the Nifty’s 2% Plunge and What It Means for the Future

At the close, the Nifty 50 was at 25,250.10 down by 2.12%

October 3, 2024. Today, the NSE Nifty 50 kicked off in the red, plummeting 2.12% and closing below 25,300 at 25,250.10. The Indian equity indices witnessed a free fall, marking a 4th consecutive session of losses, all amid escalating geopolitical tensions between Israel and Iran.

The market experienced its steepest single-day drop in months, as bears took charge from the opening bell, driving indices sharply lower. This sell-off has been dubbed the most significant since mid-July 2024, leaving investors questioning: Is this trend set to continue?

As the market bled heavily, investors lost around Rs 9.6 lakh crore, bringing the market capitalization of BSE-listed companies down to Rs 465.25 lakh crore from Rs 474.86 lakh crore.

By the end of the trading session, 1,077 shares advanced, while a staggering 2,737 shares declined, with 86 shares remaining unchanged. The losses in BSE-listed companies amounted to over Rs 11 lakh crore in investor wealth.

What’s Behind This Downturn?

A combination of macro uncertainties, regulatory changes in the F&O segment, and a gap-down opening led to a tightening grip of the bears, violating crucial support levels across the index. The sell-off was further exacerbated by the rising geopolitical tensions in the Middle East, concerns over foreign investment outflows, and SEBI’s tightening grip on F&O trading.

All 13 sectoral indices sank into the red, with Nifty Bank, Energy, and Auto leading the plunge, each falling 2-3%. The Nifty Metal index snapped an eight-session winning streak, declining 0.66%. Adding to the turmoil, volatility surged as the India VIX spiked nearly 10% to 13.17, signaling heightened market anxiety.

Geopolitical Tensions: The Catalyst for Chaos?

The escalation of conflict in the Middle East, triggered by Iran’s launch of ballistic missiles at Israel, raised fears of retaliation. Speculation is growing that Israel may target major oil fields in Iran, potentially driving up oil prices and further inflating inflationary pressures in oil-importing nations like India.

“Could this lead to further economic turmoil for India?” With rising oil prices, many are left to wonder how long the Indian markets can withstand this pressure.

Regulatory Changes: A New Challenge for Traders

Adding to the jitters, SEBI’s new rules for the F&O segment have raised concerns about lower trading volumes. The increase in contract size and limits on weekly expiries are expected to shrink retail participation, affecting overall market liquidity.

Starting November 20, new regulations will enforce:

• Minimum trading amounts for derivatives increased from Rs 500,000 to Rs 1.5 million.
• Limits on derivatives contract expiries to one per exchange per week.
• Increased margins and upfront collection of options premiums, leading to concerns that small traders could face significant risks.

What Lies Ahead?

With foreign institutional investors (FIIs) redirecting funds towards China, drawn by attractive valuations after the People’s Bank of China announced a stimulus package, Indian stocks are feeling the pressure. However, some analysts remain optimistic, suggesting that prolonged losses in Indian markets may not be in the cards.

As the market navigates through these turbulent times, one question lingers: Will Indian equities rebound, or are we headed for a longer downtrend?

Bank Nifty: Down by 2.04%

The Bank Nifty opened with a sharp decline, tumbling by 2.04% and closing in the red at 51,845.20. Meanwhile, the BSE Sensex followed a similar path, dropping by 2.10%, ending the day at a low of 82,497.10.

Today’s stock market landscape has been a challenging one, particularly in the sectorial front. Despite investors’ hopes, there were no gainers across the board, raising concerns about market stability. The Realty sector stands out as the most significant loser, plunging by 4.36%.

Among the top names in Realty, Godrej Properties Ltd. has suffered the most, witnessing a staggering decline of 5.98%. Similarly, DLF Ltd. is not far behind, experiencing a drop of 5.70%. Such significant losses are alarming for stakeholders and could suggest underlying issues that investors should closely monitor.

Foreign Portfolio Investors (FPI) recorded a massive sell-off today. With a buy value of Rs. 17,311.91 crore and a sale value of Rs. 32,555.18 crore, the net outflow stands at a steep Rs. -15,243.27 crore.

However, Domestic Institutional Investors (DII) seem to have stepped in to support the market. Their buy value hit Rs. 25,294.47 crore, with a sale value of Rs. 12,380.51 crore, resulting in a net inflow of Rs. 12,913.96 crore.

Bank Nifty

The Nifty Banking sector had some gainers and some losers for the day.

The gainers included AU Bank with a 0.04% increase.

On the other hand, the biggest losers in the sector included Axis Bank with a 3.97% decline, Kotak Bank with a 2.92% decline, HDFC Bank with a 2.62% decline, Canara Bank with a 2.41% decline, and Federal Bank with a 1.83% decline. These results indicate that most banking stocks underperformed today.

Gold and Silver Rate (INR) 3rd October, 2024

Rupee’s Slide: What’s Pressuring the Currency?

The rupee tumbled 14 paise, closing at 83.96 against the US dollar on Thursday as crude oil prices surged, igniting concerns. The volatile geopolitical landscape has added fuel to this decline, compounded by a sharp fall in domestic equity markets.

Forex traders attribute the rupee’s slide to a strong dollar and foreign fund outflows, driven by bullish Chinese markets. The session opened at 83.91 and dropped to a low of 83.97, marking a steady decline throughout the day.

With Brent crude spiking and the dollar index rising to 101.91, the question remains: How much further could the rupee fall as tensions between Israel and Iran escalate?

The rupee’s future seems clouded by risk aversion in global markets.

Stocks Highlights

JSW Steel Ltd. recently caught the market’s attention with a notable share price increase of 1.33%, closing at Rs. 1,041.00, up from Rs. 1,027.30. But what does this mean for investors? Over the past three years, JSW Steel has delivered an impressive 52.36% return, slightly outpacing the Nifty 100’s 51.25%. Yet, in comparison to the Nifty Metal Index, which soared by 80.86%, the steel giant appears to have some catching up to do.

Delving deeper, we see that JSW Steel allocates 4.63% of its operating revenues towards interest expenses, while 2.62% is dedicated to employee costs as of the fiscal year ending March 31, 2024. Is this sustainable growth?

On the flip side, Bharat Petroleum Corporation Ltd. faced a different fate, with its share price plunging 5.00%, last seen at Rs. 349.85, down from Rs. 368.25. This dip raises eyebrows, especially considering that the company reported a 35.51% return on equity (ROE) for the year ending March 31, 2024, significantly outperforming its five-year average of 21.77%. How will this affect investor confidence?

However, it’s not all sunshine. Bharat Petroleum experienced a topline contraction, with sales shrinking by 5.13%—marking the first revenue decline in three years. Despite this setback, the stock still delivered a remarkable 70.07% return over three years, far exceeding the Nifty 100’s performance.

Advance Decline Ratio

Today, the advance-decline ratio was 0.27, and the market breadth was negative. The volatility index India Vix increased by 9.86 to settle at 13.17 and the FIIs were net sellers today.

DAILY MARKET ACTION
Advancers – 587
Decliners – 2211
52Wk High – 102
52Wk Low – 65
High Band Hitters – 106
Low Band Hitters – 112
200d SMA – 23109
50d SMA – 25022
20d SMA – 25508

Top Gainers and Losers Stocks

The top gainers were JSW Steel (+1.33%), and ONGC (+0.36%).

The top losers were BPCL (-5.00%), Shriram Finance (-4.42%), LT (-4.05%), Axis Bank (-3.97%), and Reliance (-3.95%).

Top Gainers and Losers Sectors

The top losers sector were Realty (-4.36%), Auto (-2.88%), Oil & Gas (-2.72%), Financial Services (-2.43%), and Media (-2.13%).

SECTORS – NOTABLE ACTION
REALTY -4.36%
AUTO -2.88%
OIL & GAS -2.72%

Stocks Ban List

(SEBI) F&O ban list (HINDCOPPER close at -337.75), (BSOFT close at -590.00), (RBLBANK close at -199.23), and (BANDHANBNK close at -189.01) are not currently on the stock exchange.

A stock enters the Ban List if its MWPL is above 95%. Implying that, Ban List shows the Futures and Options (FnO) stocks whose combined open interest in all FnO contracts for a given period crosses 95% of Market-Wide Position Limit.

MANAPPURAM, PNB, GNFC, IDFCFIRSTB, and NATIONALUM stocks has the possibilities of entrance in the ban list.

Daily Pivots

As per the above pivots data, 24900 to 25600 is the Nifty 50 trading range.

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This article is only for educational purposes and is not an investment advice.