Sensex tumbles over 900 pts intraday: Why are stock markets falling today?

Stock market fall, July 10: The NSE Nifty50 fell 1.19 per cent or 291 points, reaching a low of 24,141.80 levels intraday

Sensex, Nifty fall sharply today, July 10: Benchmark index Sensex plunged 1.13 per cent or 915.18 points, to hit an intraday low of 79,435.76 levels on Wednesday, July 10, 2024.

Concurrently, the NSE Nifty50 fell 1.19 per cent or 291 points, reaching a low of 24,141.80 levels.

The BSE Sensex ended at 79,925, down 427 points or 0.53 per cent. The Nifty50 closed at 24,324, down 109 points or 0.45  per cent.

Meanwhile, the broader markets also saw major declines, with Nifty SmallCap and MidCap indices falling 2.85 per cent and 2.36 per cent respectively, in the intraday trade. These indices closed up to 0.7 per cent lower.

According to Vinod Nair, head of research at Geojit Financial Services, the Indian stock market experienced profit booking ahead of the upcoming earnings season.

"The expectations are muted given moderation in sales growth due to slowdown in the world economy and consolidation in margins driven by high inflation. Additionally, the market is under temporary risk towards high budget expectations, which appears well factored in the last one month's rally," he said.

Going ahead, Ajit Mishra – SVP, Research, Religare Broking, suggests investors refrain from aggressive long positions in the index for now and wait for further clarity.

"Additionally, we have started seeing erratic swings across the board, which are likely to intensify with the start of the earnings season. Traders should prefer a hedged approach and closely monitor their position sizes," he advised,

Here are the top reasons why Sensex, Nifty fell on Wednesday, July 10:

Profit booking in large-caps; M&M in focus

The sudden downturn in the markets, according to analysts, was a long-due profit booking. Deepak Jasani, head of retail research at HDFC Securities noted that markets are seeing time-wise correction. "Profit booking was expected given the numerous opportunities where investors could have capitalised on gains," he said.
 

Among individual stocks, M&M was the top contributor towards today's fall in the Sensex and Nifty indices. M&M stock slipped 7.31 per cent in the intraday deals to hit a low of Rs 2,711.75 per share. It accounted for over 30 per cent in the BSSE benchmark's 427-point decline.

According to analysts, the decision by M&M and Tata Motors to slash prices of some of their products has not gone down well with investors. 

Meanwhile, other large-cap losers included Tata Steel, TCS, SBI, HCL Tech, JSW Steel, Tata Motors, Infosys, Kotak Bank, ITC, and IndusInd Bank.
 

Valuation concerns in mid, small-caps

Commenting on the broader market slump, G Chokkalingam, founder of Equinomics Research pointed out that historically, corrections in SmallCaps occur approximately every two years, but the current bull run in small caps had surprised many investors. Some stocks were trading at exceedingly high PE multiples of 4200x, raising concerns about valuations.

Today's market drop, he suggested, was largely driven by profit booking as the returns from Small and Midcap segments had been remarkably high, compelling investors to secure profits.

Nervousness ahead of Budget 2024

Chokalingam also highlighted another factor possibly influencing the market downturn: anticipation surrounding the Budget announcement. Historically, markets have tended to correct before and after Budget announcements, adding to the volatility observed today.

Bank stocks under pressure

That apart, banks were also under pressure, which may have contributed to the fall. This comes after the Reserve Bank of India (RBI) raised an alarm over certain banks having ‘lakhs’ of accounts used for fraudulent transactions and evergreening of loans during an interaction with chief financial officers and auditors of banks and financial institutions on Tuesday.

“One area that has come into sharper focus in the last couple of years is the control and management of internal accounts. We found certain banks having lakhs of such accounts with apparently no valid reason,” RBI deputy governor Swaminathan J said in his address to the lenders. READ HERE