Markets Under Pressure: Sensex Sheds 335 Points, Nifty Slips Below 23,700

Domestic equity markets started Tuesday’s session on a weak note, with the Sensex and Nifty falling in early trade as higher crude oil prices, renewed geopolitical tensions and concerns over a possible US Federal Reserve rate hike weighed on investor sentiment.

At 9:16 am, the BSE Sensex was down 335 points, or 0.44%, at 75,797.59. The NSE Nifty fell 0.36% to 23,694.60, slipping below the key 23,700 level.

The broader market was relatively steady compared with the benchmark indices. The Nifty Midcap 100 declined 0.12%, while the Nifty Smallcap 100 edged up 0.05%. The Nifty Microcap 250 gained 0.39%, suggesting that buying interest in smaller stocks remained intact despite the broader market weakness.

Sectoral performance was mixed. Nifty Metal rose 0.24%, while the Chemicals index gained 0.15%. Meanwhile, Oil & Gas fell 0.48%, Financial Services declined 0.41% and Private Bank slipped 0.39%. IT, Auto, FMCG and PSU Bank stocks were also trading lower.

Crude Oil Remains a Key Concern

Crude oil prices extended their gains for a third straight session, with Brent crude trading around $97 a barrel after touching a six-week high on Monday. The latest rise came after Iran issued fresh threats to target energy infrastructure in the Gulf if further attacks take place. Higher oil prices remain a concern for India because of its heavy dependence on crude imports.

A prolonged rise in crude prices could push up inflation, increase pressure on the rupee and weigh on corporate profit margins, keeping investors cautious.

Global Market Signals

Asian markets were mixed in early trade. Japan’s Nikkei gained around 0.2%, while South Korea’s KOSPI advanced 1.2%. Australia’s benchmark index, however, declined 0.6%.

US stock futures were marginally lower after Wall Street remained closed on Monday for the Labor Day holiday.

The US 10-year Treasury yield was around 4.79%. Markets were also pricing in about a 60% probability of a 25-basis-point Fed rate hike at the September 16 policy meeting.

Large-Caps Could Offer Value

V K Vijayakumar, chief investment strategist at Geojit Investments, said the Indian market is currently in its fifth consecutive week of a gradual downtrend.

He identified elevated crude prices, selling pressure in IT stocks, expectations of a Fed rate hike and heavy IPO activity as key factors behind the market’s recent weakness. The strong IPO pipeline, he noted, is absorbing a significant amount of liquidity.

Vijayakumar said the factors driving the downtrend remain in place, meaning the market could stay under pressure in the near term. However, the correction has also created opportunities in large-cap stocks, which remain weak despite improving fundamentals.

He said large-caps have also been affected by the continued flow of monthly SIP money into mid- and small-cap stocks, even as valuations in those segments remain elevated.

A reversal of this trend could eventually support fundamentally strong large-cap stocks. Vijayakumar expects such a shift could emerge towards the end of September, once the major NSE and Jio IPOs are completed and funds locked into the issues return to investors through refunds.

“Instead of trying to time the market, investors can think about changing the weightage of portfolios towards large-caps where the risk-reward is favourable,” he said.

Nifty Technical Outlook

Ponmudi R, CEO of Enrich Money, said the Nifty remains technically weak after closing below 23,800 in the previous session. He said a sustained recovery above 24,000 would be necessary to revive upward momentum. A decisive move above 24,200 could further strengthen the bullish outlook and open the possibility of additional gains.

On the downside, 23,750-23,700 is the immediate support zone, while 23,600 remains the key support level. A break below 23,600 could lead to further weakness.

For now, the near-term technical outlook for the Nifty remains cautious to bearish.