5 Reasons why Sensex fell 650 pts, Nifty below 21,600 intra-day on Tuesday

The S&P BSE Sensex fell over 650 points, while the NSE Nifty 50 shed nearly 200 points in intra-day trades on Tuesday, January 02.

Indian equity benchmark indices declined nearly 1 per cent each in intra-day deals on Tuesday, January 02, largely weighed down by weakness in auto, banking and IT shares. 

The S&P BSE Sensex which registered a fresh all-time high of 72,562 on Monday, January 01, hit low of 71,614 on Tuesday. The BSE benchmark was down over 650 points at the lowest point of the day today. Meanwhile, the NSE Nifty 50 fell to a low of 21,556 - down nearly 200 points in intra-day trades.

Among the frontline stocks, UltraTech Cement with a loss of over 3 per cent was the top loser among in the Sensex 30. Mahindra & Mahindra, Wipro, Larsen & Toubro, Tech Mahindra, NTPC, ICICI Bank, JSW Steel, Tata Steel and Infosys were the other major losers.

The broader market also fell in line with the frontline indices. The BSE MidCap and SmallCap indices were down around 0.7 per cent each. 

According to experts the sharp rise in India VIX or volatility index to multi-month highs in the recent past is seen as a precursor to rise in volatility going ahead. Further, the rollovers of January Nifty futures at a significant premium also signaled overheating in the market as traders paid higher premiums to roll over their long positions. Watch video

Technically, the Nifty has dipped below the 20-DMA in intra-day basis. A decisive fall below 21,650 might call for directional fall in the market, said Rupak De, Senior Technical Analyst at LKP Securities. 

That apart, here are the other four reasons why the Sensex and Nifty fell on Tuesday.

Profit-taking: The Sensex and Nifty have rallied over 13 per cent in the last two months driven by hopes of a likely reversal in interest rate cycle. Given the sharp gains, investors seem to be taking home some profit ahead of the Q3 earnings season, which starts next week.

Global cues: Asian markets exhibited a mixed trend today, with Hang Seng down 1.5 per cent. China's benchmark indices were down up to 1 per cent, as China's official manufacturing PMI data shows deepening contraction in December.

The official factory activity remained in contraction and declined further to 49 in December as against 49.4 in November. Separately in Australia, manufacturing PMI suggests that activity fell at the sharpest rate since May 2020, as the index dropped to 47.6 in December from 47.7 in November. Deteriorating demand conditions remains a key drag, which in turn has led to job losses, says Kranthi Bathini, Equity strategist at WealthMills Securities.

Fund flows: Foreign investors net sold stocks to the tune of Rs 855.80 crore in the first trading session of the year 2024. Meanwhile, domestic institutional investors were net buyers of shares worth Rs 410.46 crore.

Weaker Rupee: The Indian Rupee ended marginally lower at 83.24 in trades on Monday, after moving in a narrow range amid thin volumes.