Share Market Down: The trend of decline in Indian stock markets continued on Tuesday, January 20. Sensex fell by 400 points in early trade. At the same time Nifty fell below 25,500. Continuous selling by foreign investors, mixed results of the third quarter and increasing fears of trade war at the global level have weakened the morale of investors. An even sharper decline was seen in the broader market. BSE Smallcap and Midcap indices fell by 1.2. All sectoral indices were also in the red.
At around 11.30 am, BSE Sensex was trading 351.97 points or 0.42 lower at 82,894.21. Nifty was trading at 25,459.65, down 125.85 points or 0.49%.
There were 8 big reasons behind today’s decline in the stock market-
1. Concerns related to global trade war
The risk-taking sentiment in global markets has weakened after new uncertainty emerged regarding America’s tariff policy. The rise in US Treasury yields and fears of possible increase in trade tensions between the US and Europe fueled selling in global stock markets, which also impacted Indian markets.
VK Vijayakumar, Chief Investment Strategist, Geojit Investments, said that until there is clarity on the tariff dispute related to Greenland between the US and Europe, the markets may remain volatile. According to him, geopolitical and geo-economic issues will continue to dictate the market direction in the near term.
2. Continuous selling by foreign institutional investors (FIIs)
On Monday, FIIs withdrew Rs 3,262 crore from the Indian stock market. So far in the month of January, foreign investors have withdrawn about Rs 29,315 crore from the Indian stock market. Continued selling by foreign investors kept pressure on the entire stock market and limited buying by domestic investors.
3. Mixed results for Q3
Signals related to quarterly results have currently failed to give any strong direction to the market. The IT sector appeared to be particularly under pressure. After the weak outlook of Wipro, there was a sharp fall in its shares on Monday, the impact of which continued on IT shares on Tuesday also. Nifty IT index was the worst performing sectoral index, slipping nearly 1.1%. According to VK Vijayakumar, the initial Q3 results do not currently show any clear recovery in earnings growth. However, the picture may improve with the results of the auto sector.
4. Weak global signal
Asian markets showed a mixed trend. South Korea’s Kospi index remained in the green, but Japan’s Nikkei 225, Shanghai’s SSE Composite and Hong Kong’s Hang Seng index were seen trading in decline. US markets remained closed on Monday due to holidays, but on January 20, Wall Street futures were seen falling more than 1%.
5. Weakness in rupee
On Tuesday, the rupee fell 8 paise to 90.98 against the US dollar. Strong dollar demand from importers and continued foreign investment withdrawals kept pressure on the Indian currency. According to Forex traders, the rupee continues to be under pressure due to geopolitical uncertainty and weak domestic stock market.
6. Uncertainty regarding the possible decision of the US Supreme Court
Investors are waiting for the decision of the US Supreme Court on the tariffs imposed by US President Trump. Vijayakumar said that if the decision is contrary to market expectations, its impact can be seen on the movement of both global and domestic markets.
7. Rise in crude oil prices
In the international market, the price of Brent crude increased by 0.11% to $ 64.01 per barrel on Tuesday. Rising crude oil prices raise concerns about inflation and fiscal pressure for India, which has a negative impact on stock markets.
8. Weekly expiry day of Nifty
The weekly expiry of Nifty’s Futures and Options (F&O) contracts takes place on Tuesday. On such days, the market usually sees higher volatility due to unwinding and rollover of derivative positions, leading to sharp intraday movements in the index.
Now what next?
Anand James, Chief Market Strategist, Geojit Investments, said that Nifty’s return above the lower Bollinger Band after taking support near the recent lower levels is a positive sign. However, he cautioned that if the index fails to hold above 25,550, the upside potential in the near term may be limited.
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