Equity benchmark indices fell in early trade on Wednesday in tandem with weak trends in global markets ahead of the US Federal Reserve’s interest rate decision. The BSE Sensex tanked 700 points or 1 per cent to below 67,000 level. It touched the day’s low of 66,887.99. Meanwhile, Nifty50 dipped to 19,936, down 0.98 per cent or 198 points. The market capitalisation of all listed companies on BSE declined by Rs 1.92 lakh crore to Rs 321.08 lakh crore.
Parth Nyati, Founder at Tradingo, said: “Today, both Nifty and Sensex experienced profit booking, largely attributed to a sharp sell-off in HDFC Bank following its analyst meeting. During the meeting, concerns were raised about potential margin pressure and the asset quality post-merger of HDFC twins. Additionally, global markets exhibited caution in anticipation of the upcoming FOMC meeting. Factors such as increasing US bond yields, rupee weakness, a surge in crude oil prices, and selling by foreign institutional investors (FIIs) further contributed to the challenges faced by our markets.”
From the Sensex pack, HDFC Bank, RIL, JSW Steel, Maruti and UltraTech Cement were the top losers.
HDFC Bank tanked 3 per cent lower after the bank on Monday said its gross non-performing assets will likely increase as of July 1, after its merger with HDFC.
Shares of Bharat Dynamics rose 3 per cent higher after the company signed a contract worth Rs 291 crore with IAF.
Sector-wise, Nifty Financial Services declined 0.87 per cent and Nifty Bank fell 0.68 per cent. FMCG, IT, pharma, realty, and healthcare sectors also opened lower. In the broader market, Nifty Midcap100 gained 0.05 per cent, while Smallcap100 opened flat.
Here’s what’s driving the Indian stock markets down
HDFC Shares Sink: HDFC Bank Ltd., India’s largest private lender, saw a decline of over 4 per cent in share prices in Wednesday’s trade after brokerage firms expressed their mixed views on the stock post the bank’s analyst and institutional investor meeting.
Nishit Master, Portfolio Manager, Axis Securities PMS, said: “HDFC Bank has commented on pressure on margins due to excess liquidity and merger-related costs, which will remain elevated in the short term. This development has led to earnings downgrades for HDFC Bank for FY24, driving the pressure on the stock.”
US Fed Outcome: Asia-Pacific markets mostly fell on Wednesday as investors stayed on the sidelines ahead of the US Fed’s interest rate decision later tonight.
The Federal Reserve is widely expected to hold rates steady, but the central bank will give an update on its economic outlook with the summary of economic projections.
Oil prices: The Brent crude oil price, which topped the $96 per barrel-mark overnight, was hovering around $93 per barrel on Wednesday.
Analysts at Jefferies believe fiscal pressures for the Indian economy are gradually rising as oil prices, that are close to the $100 a barrel (Brent) mark, may continue to climb ahead of a busy election calendar.
US Treasury yields: US yields hit a 16-year high ahead of the conclusion of the Federal Reserve’s policy meeting on Wednesday. The benchmark 10-year Treasury yield reached a session high of 4.371 per cent overnight on Tuesday, its highest level since early November 2007.
The five-year Treasury yield also reached a 16-year high of 4.524 per cent, while the yield on the two-year note hit a two-month high of 5.114 per cent.
Technical Outlook: From a technical perspective, Nifty and Sensex have identifiable immediate support levels at 19,900 and 66,900, respectively. If these levels are breached, we may witness additional profit booking, potentially leading towards 19,640 for Nifty and 66,000 for Sensex.
What Should Investors Do Now?
Master said: “We remain constructive on the markets and believe that if one has a 3 to 5-year view, one can continue to invest even at the current elevated levels. Investors looking to increase their equity allocation should spread out their buying over the next three months to benefit from any potential fall in the market.”
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