It was the biggest single-day slide for the Bombay Stock Exchange (BSE) benchmark Sensex in more than 18 months on Wednesday. The Sensex nosedived by 1,628 points while NSE index Nifty registered biggest plunge since 2022.
The Sensex, Nifty free fall occurred day after HDFC Bank posted a net profit of INR 16,732 crore in its Q3 results.
HDFC stock went down 8.46 per cent on Wednesday to close at INR 1,536.90 on the BSE.
During the day, it further plunged to 9 per cent to INR 1,527.25.
After a bloodbath on Dalal Street on Wednesday, analysts predict that domestic equities will witness some sort of weakness in the next two weeks, raising concerns of further slide in the Sensex.
A nosedive correction in banking stocks, along with concerns over delays in US FED rate cuts seem to have impact market sentiments.
Elevated valuations may have led to a correction, as the market fall is led by banks on the back of HDFC results. Markets are taking a breather, especially since market valuations are higher than historical multiples.
Heightened levels of credit/deposit (CD) ratio may have exceeded RBI’s comfort levels, leading to a slide.
Markets expect either margin pressure, in case banks go in for aggressive deposit mobilization, a slowdown in lending growth, or both. This development can lead to some de-rating.
Weak global market cues also dragged domestic indices lower. Asian markets traded in the red, while US stock market indices ended lower overnight as bond yields rose.
US Treasury yields rose on Tuesday after central bankers in Europe and the United States pushed back against market expectations of imminent interest rate cuts. The yield on the benchmark US 10-year Treasury note increased by over 11 bps to 4.064%, weighing on risky assets.
Global negativity will come from the rising bond yields in the US responding to concerns that the sharp rate cuts expected from the Fed may not happen.
The US Fed is unlikely to cut in March and the total cuts in 2024, impacting global equity markets.
The US is ‘within striking distance’ of the Federal Reserve’s 2% inflation goal, but the central bank should not rush to cut its benchmark interest rate until it is clear lower inflation will be sustained, Fed Governor Waller said.
And regardless of when rate cuts begin, Waller said the central bank should proceed ‘methodically and carefully,’ not make the sort of large, fast reductions used when the Fed is trying to bail out the economy from a shock or a pending downturn, Reuters reported.
On January 16, Nifty 50 index formed a spinning top candlestick pattern on the daily chart with a probability of a bearish divergence.
‘For the time being, the level of 22,120 will act as resistance while the immediate support is placed at 21,930 and the next strong support is positioned at 21,800, analysts said.
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