Stock market today: Sensex, Nifty 50 fall nearly 2% each; why is Indian stock market tanking?

Stock market today: Indian stock market benchmarks the Nifty 50 and the Sensex fell nearly 2 per cent each in intraday trade on Wednesday, March 13, a day after the US inflation prints saw a mild uptick in February, raising concerns that the US Federal Reserve may postpone rate cuts beyond June.

The Nifty 50 opened at 22,432.20 against the previous close of 22,335.70 and fell 1.9 per cent to hit its intraday low of 21,905.65 by 2:50 pm on Wednesday.

The Sensex opened at 73,993.40 against the previous close of 73,667.96 and fell 1.6 per cent to hit its intraday low of 72,515.71.

Mid and smallcap indices suffered massive losses. While the BSE Midcap index cracked nearly 4 per cent, the BSE Smallcap index plunged 4.5 per cent in intraday trade so far.

Also Read: Smallcap segment can suffer more; time to avoid the sector? Experts weigh in

Over 200 stocks, including Hindustan Unilever, SBI Cards and Payment Services and Zee Entertainment, hit their 52-week lows in intraday trade on the BSE.

Also Read: Is the bull market about to turn into a bubble?

Here are the five major factors that experts believe may have triggered an across-the-board selloff in the domestic stock market today. Take a look:

1. Concerns over rich valuations

The domestic stock market is experiencing a significant selloff following a robust rally since November, which has propelled valuations upward even in the absence of fresh market catalysts.

Experts say the market appears to be in a bubble zone, especially in the smallcap segment.

“The excessive valuations in these segments driven by the irrational exuberance of retail investors have been a concern for many months now,” said V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services.

2. Frothy market amid lack of fresh triggers

While the market benchmarks hit fresh record highs last week, experts flagged concerns that most positives were already discounted and the market would need fresh positive triggers to sustain the gains and move ahead. In case of no or negative triggers, the market was expected to witness consolidation which is happening now.

3. Rate cut conundrum

The US inflation rose more than expected in February, sparking worries that the interest rate cuts by the US Federal Reserve may be delayed. This boosted the dollar index, and even the US stock market surged. However, the domestic market seems to view this negatively because prolonged high-interest rates could deter foreign capital inflows into emerging markets like India, affecting them adversely.

“Delayed Rate Cuts might lead to Indian Markets being impacted negatively. This is because we may see many FIIs taking out money from the Indian markets and investing in their own country as they are receiving investment returns at higher percentages which would further widen the interest rate gap between Indian and the US,” Hemant Sood, Managing Director of Findoc told Mint.

4. The impact of domestic macro numbers

India’s retail inflation for February did not show remarkable improvement and came near the previous month’s level while the factory output prints for January came weaker-than-expected.

Also Read: February inflation remains steady at 5.1% but food inflation up

As Mint reported earlier, India’s consumer price index (CPI) – based inflation eased to a four-month low of 5.09 per cent in February 2024, against 5.1 per cent in January while India’s industrial output growth stood at 3.8 per cent in January, unchanged month-on-month.

Also Read: Factory output: India’s industrial production at 3.8% in January

5. The March effect

Some experts are of the view that the stock market sees some weakness in March due to some profit booking because of the closing of the financial year.

“Some profit booking is getting done because of the financial year closing approaching,” said Ajit Banerjee, Chief Investment Officer at Shriram Life Insurance Company.

Many corporates and institutional investors tend to liquidate their positions in equities in March to show profits on their balance sheets at the end of the financial year. Moreover, March is the deadline for the payment of advance tax so some corporates and investors may choose to sell equities to raise cash.

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Disclaimer: The views and recommendations above are those of individual analysts, experts and broking companies, not of Mint. We advise investors to check with certified experts before making any investment decisions.