Geopolitical Tensions Weigh on Indian Equity Markets

At the close, the Nifty 50 was at 19,512.35 down by 0.72%

In a backdrop of Geopolitical Uncertainty, the Indian equity markets witnessed significant turbulence today, marked by widespread volatility and selling across various sectors. Despite an initially weak start, both benchmark indices remained firmly in the negative territory, ultimately closing near the day’s lowest point. This bearish sentiment not only wiped out gains from the previous session but also terminated a two-day winning streak. The primary driver behind this market turbulence is the mounting concern over escalating geopolitical tensions in the Middle East.

Nifty’s Decline and Investor Anxiety: The NSE Nifty 50 started the day on a downbeat note, experiencing a 0.72% decline and closing in the red, with the index slipping below the 19,550 mark. Investors have displayed a cautious approach, shedding equity assets due to growing apprehensions regarding the consequences of the Israel-Hamas conflict. There are lingering worries about its potential impact on the already fragile global economy, characterized by high interest rates and persistent inflation.

Crude Oil Prices and Inflation Concerns: A significant concern stemming from the Middle East crisis is the proximity of most oil-producing nations to the conflict zone. A prolonged war could lead to a surge in international crude oil prices, intensifying inflationary pressures. The increased oil import costs could prompt the central bank to adopt a more hawkish stance, further impacting domestic inflation rates.

Investor Flight to Safe Havens: Amidst the uncertainty, investors are flocking to safe-haven assets such as gold and the US dollar. Consequently, Indian stocks across the board have faced substantial declines, while Asian indices have displayed mixed outcomes.

Global Market Pessimism: The unexpected escalation in the Middle East has rekindled pessimism in global markets. The rapid surge in oil prices poses a significant threat, compounding the challenges posed by elevated inflation and interest rates worldwide.

Consolidation in Mid- and Small-Cap Segments: Investors in the mid- and small-cap segments are adjusting their portfolios due to premium valuations. This segment is currently undergoing a period of consolidation as investors seek to navigate the prevailing market uncertainties.

Bank Nifty: Down by 1.07%

The Indian financial markets experienced a bearish trend, with both the Bank Nifty and BSE Sensex facing challenges throughout the trading session. The Bank Nifty, representing the banking sector, opened in negative territory and saw a notable decline of 1.07 percent, concluding the day at 43,886.50. Similarly, the broader BSE Sensex, reflecting overall market sentiment, declined by 0.73 percent, closing at 65,512.39, marking a low point.

Multiple factors have contributed to the prevailing negative sentiment in the banking and stock markets. Ongoing geopolitical tensions in the Middle East have cast a cloud of uncertainty over global financial markets, impacting investor confidence.

Additionally, concerns about rising interest rates and persistent inflationary pressures have heightened market apprehensions. These economic factors are prompting investors to reevaluate their positions and adopt a more cautious approach to their portfolios.

Sectorally, there were no winners today, with the media sector experiencing a significant downturn, characterized by a lack of clear winners. This downturn is exemplified by the top loser in the sector, Hathway Cable & Datacom Ltd., which witnessed a substantial decline of -6.31%. Furthermore, TV18 Broadcast Ltd. and Dish TV India Ltd. also incurred significant losses, with declines of -4.76% and -3.35%, respectively.

Foreign Institutional Investors (FII/FPI) actively participated in the Indian financial markets, with a buy value of Rs. 5,052.21 crore. However, their sales surpassed their purchases, amounting to Rs. 6,049.97 crore, resulting in a net deficit of Rs. -997.76 crore in FII/FPI activity.

In contrast, Domestic Institutional Investors (DII) displayed robust activity in the market. They made substantial purchases, totaling Rs. 8,216.60 crore, while their sales amounted to Rs. 5,555.33 crore. Consequently, the net value of DII activity remained positive, reflecting a significant surplus of Rs. 2,661.27 crore.

Bank Nifty

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

There were no gainers in the Bank Nifty today. Conversely, the sector’s biggest losers included Punjab National Bank, which saw a decline of 4.69%, Bandhan Bank with a 2.73% drop, Bank of Baroda with a 1.74% decrease, State Bank of India with a 1.63% fall, and IDFC First Bank with a 1.59% dip. These results indicate that most banking stocks did not perform well for the day.

Buzz

In the midst of escalating geopolitical tensions, the Indian Rupee (INR) faced a day of delicate trading, maintaining a narrow range between 83.20 and 83.25. This heightened sensitivity in the currency market follows a tragic incident, marking the deadliest day of violence in the region in the past half-century.

RBI’s Role in Currency Stability The Reserve Bank of India (RBI) has played a crucial role in preventing a significant fall in the INR. By supporting the INR at the 83.30 level, the central bank has signaled its commitment to maintaining currency stability. However, external factors, such as rising crude oil prices and a stronger US dollar, are exerting pressure on the rupee, limiting its upward movement.

Future Outlook for the INR Looking ahead, the INR is likely to remain within the range of 83.10 to 83.50. The prevailing weakness in the rupee may persist, with a potential sharp correction if it breaches the 83.40 mark. Investors and businesses should closely monitor developments in global crude oil prices and the US dollar’s strength, as these factors will continue to impact the INR’s performance.

Buzzing

Dr. Reddy’s Laboratories Ltd. witnessed a positive movement in its share price, rising by 1.13% from the previous close of Rs 5,424.90 to reach Rs 5,486.00. Notably, the company’s annual revenue growth of 16.78% has outperformed its three-year Compound Annual Growth Rate (CAGR) of 12.22%. Additionally, Dr. Reddy’s Laboratories achieved a Return on Equity (ROE) of 19.35% for the year ending 31st March 2023, surpassing its five-year average of 14.06%. These figures suggest a strong performance and sound financial health for the company, which may be appealing to investors.

In contrast, Adani Ports & Special Economic Zone Ltd. faced a decline in its share price, dropping by -5.09% from the previous close of Rs 830.75 to Rs 788.50. However, the company’s annual revenue growth of 23.86% has exceeded its three-year CAGR of 17.53%. It’s important to note that Adani Ports allocated 11.33% of its operating revenues towards interest expenses and 5.65% towards employee costs in the fiscal year ending on 31st March 2023.

Advance Decline Ratio

Today, the advance-decline ratio was 0.28, and the market breadth was negative. The volatility index India Vix increased by 12.11 percent to settle at 11.55 and the FIIs were net sellers today.

DAILY MARKET ACTION
Advancers – 527
Decliners – 1910
52Wk High –  79
52Wk Low – 28
High Band Hitters – 97
Low Band Hitters – 127
200d SMA – 18524
50d SMA – 19602
20d SMA – 19776

Top Gainers and Losers Stocks

The top gainers were Dr. Reddy (+1.13%), HCL Technologies (+0.94%), Tata Consumer (+0.56%), ONGC (+0.41%), and Hindustan Unilever  (+0.34%).

The top losers were Adani Ports (-5.09%), HDFC Life (-2.68%), Hero MotoCorp (-2.50%), M&M (-2.19%), and Tata Steel (-2.03%).

Top Gainers and Losers Sector

The top losers sector were Media (-2.18%), Consumer Durables (-1.47%), Metal (-1.44%), Financial Services (-1.13%), and Oil & Gas (-1.06%)

SECTORS – NOTABLE ACTION
MEDIA -2.18%
CONSUMER DURABLES -1.47%
METAL -1.44%

Stocks Ban List

(SEBI) F&O ban list (PNB open at -76.00 and close at -73.35), (DELTACORP open at +137.75 and close at +141.65), (MANAPPURAM open at -141.20 and close at -139.95), and (IBULHSGFIN open at -172.15 and close at +173.00) 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.

L&TFH, HINDCOPPER, BALRAMCHIN, MCX, SAIL, SUNTV, RBLBANK, and BHEL stock has the possibilities of enterance in the ban list.

Daily Pivots

As per the above pivots data, 19450 to 19590 is the Nifty 50 trading range.

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