Markets slide for third straight day; Smallcaps rally 3.8% in 2 sessions

Benchmark indices continued their downward trend for the third consecutive session on Wednesday, weighed down by selling pressure in banking heavyweights.

 

However, the broader market outperformed, with the Nifty Smallcap 100 index surging 1.43 per cent during the day, extending its two-day rally to 3.82 per cent.  

 

The Sensex closed at 75,736, down 203 points (0.3 per cent), while the Nifty ended at 22,913, slipping 20 points (0.09 per cent). Both indices hit their lowest levels since January 27. 

 

In the last 12 trading sessions, the benchmarks have recorded gains only once. The Nifty Smallcap 100 index rebounded sharply after an 11.3 per cent decline over the previous nine sessions, driven by renewed buying interest in quality stocks at beaten-down valuations.  

 

HDFC Bank (-2.4 per cent), ICICI Bank (-0.9 per cent), and ITC (-1.1 per cent) were the top drags on the Sensex. Banking stocks faced profit-booking amid concerns over the government’s plan to increase deposit insurance coverage, which could raise costs for lenders

 

The market breadth remained positive, with 2,616 stocks advancing and 1,347 declining. The total market capitalisation of BSE-listed firms rose by ₹3 trillion to ₹404 trillion. 

 

The government is considering raising the insurance limit for bank deposits beyond the current ₹5 lakh per account. This follows the Reserve Bank of India’s (RBI’s) recent intervention in the New India Co-operative Bank crisis, where deposit withdrawals were suspended for six months.

 

Investor sentiment was dampened by the Federal Reserve’s January meeting minutes, which signaled a delay in rate cuts due to persistent inflation. Concerns over potential US tariffs on Indian goods also added to the uncertainty.

 

“Domestic equity indices faced minor losses due to global headwinds, including inflationary pressures and delayed rate cut expectations. However, the broader market showed resilience, supported by improving consumption outlook and moderating inflation,” said Vinod Nair, Head of Research, Geojit Financial Services.

 

“The recent rebound in broader indices offers some relief. Traders should adopt a cautious stance, focusing on quality stocks in sectors like banking and IT, while avoiding aggressive positions,” added Ajit Mishra, SVP-Research, Religare Broking.

 

Gold prices hit a fresh high, trading at $2,943 per ounce, reflecting safe-haven demand amid global economic uncertainty.

 

Market trajectory in the near term will likely be influenced by global developments, including US trade policies and central bank actions. While the broader market shows signs of recovery, investors are advised to remain selective and focus on fundamentally strong stocks.