Present Share Market: The local benchmark indices, the Sensex and Nifty 50, settled with substantial losses as bears gained control of D-Street late on Wednesday, December 20. Market observers attribute the slump to profit booking and blame the expensive mid- and small-cap companies for triggering the long-overdue correction.
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The 30-share Nifty 50 concluded the day at 21,106.40, down 346 points, or 1.62 percent, while the 30-share BSE Sensex concluded the day at 70,385.09, down 1,052.10 points, or 1.47 percent. The Nifty 50 is expected to enjoy its best month since July 2022 after rising by 7% in December.
While the Nifty Midcap 100 index dropped 4.5% from the day’s high, the Nifty Smallcap 100 index lost 5% from the high to a low of 14,951. The majority of IT enterprises’ revenue comes from the US market; thus, predictions of a rate decrease in the first half of 2024 have helped them achieve gains of about 10% over the last two weeks.
Investor confidence was lowered as the rupee closed flat versus the US dollar at 83.18 due to worries over oil supply via the Red Sea route, which led to significant selling in the equity markets.
Forex traders assert that foreign capital flight in the context of volatile crude oil prices drove the currency lower, even though the US dollar index found support below 102. The dollar index, which increased 0.08 percent to 101.87 on Wednesday, reflects the US dollar’s strength in comparison to a basket of six other currencies.
The top 5 reasons for the current Share Market crash are as follows:
International cues have an impact on attitude.
On Wednesday, Asian stocks saw significant increases after a little rebound on Wall Street. Investors expected that Japan’s efforts to keep investor interest rates low would serve as a signal for similar worldwide trends. US futures rose following two days of gains, but oil prices mostly stayed unchanged.
The US dollar and a basket of peers held steady as traders evaluated the possibility that the Fed might soon begin cutting interest rates. Fed officials have begun to take a different tack after the FOMC meeting last week, which resulted in three rate decreases planned for 2024 and an increase in the financial markets.
Keeping track of earnings (Share Market)
Due to investors taking gains, the Nifty 50 saw its lowest day in nine months on Wednesday. Analysts claim that the decline is “normal for markets.” The domestic market had a rapid and severe sell-off in the second half, despite the continued positive trends observed in its international peers.
The reason for this is that investors may have been taking profits after the last big surge that drove up the cost of small- and mid-cap companies. Investors booked profits after the recent surge in gas prices. Based on data from Vinod Nair, Head of Research at Geojit Financial Services, the industries that had the least amount of decline were banking, IT, and FMCG.
A decline in broader markets
Small- and mid-cap companies with a stronger regional concentration dropped 3.27% and 3.63%, respectively, below average. This was the worst session in three months for small caps and the worst in twelve months for mid-caps.
The head of research at Sharekhan and vice president, Sanjeev Hota, stated that “we are unlikely to see the margin of safety in small- and mid-caps in 2024 that we witnessed in 2023, as some pockets are overstretched after the recent rally.” Despite the Nifty having gained 16.82% thus far in 2023, small- and mid-cap stocks have increased 48.06% and 39.72%, respectively, significantly outpacing the session’s loss.
An increase in COVID-19 cases (Share Market)
Thus far, up to 21 cases of the COVID-19 subvariant JN.1 have been discovered across the country. Kerala and Maharashtra have reported only one case each with COVID-19 sub-variant JN.1, but Goa has recorded 19 cases. There have been 16 documented COVID-19-related deaths in the past two weeks, with several of the deceased having serious coexisting conditions.
The easy money mindset and a healthy primary market might have contributed to a decline. The constrained liquidity that high-net-worth individuals (HNIs) experienced as a result of their involvement in initial public offerings (IPOs) may have contributed to the selling pressure. The man of Tradingo, Parth Nyati, hinted that some investors may be exploiting the rise in COVID cases as a convenient excuse to liquidate their holdings.
The Nifty Bank index is dropping.
Strong selling pressure on the Bank Nifty index resulted in the formation of a bearish engulfing candle on the daily chart. Today, PSU bank stocks, such as those of Canara Bank, State Bank of India, and Bank of Maharashtra, had notable drops of two to four percent.
According to Kunal Shah, Senior Technical and Derivative Analyst at LKP Securities, “the index’s immediate resistance is located at the 47,600–47,700 zone, and a breakthrough above this level could pave the way for further upside, targeting 48000.” It’s still a gloomy forecast, suggesting selling on any increases in value and exercising caution.
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