Why Sensex, Nifty 50 are nosediving this week — explained with five reasons

Stock market today: Benchmark share indices extended their losses for the third straight session on Thursday. BSE Sensex opened 0.87% lower at 66,608 and hit an intraday low of 66,137. The 30-share index has slipped from 67,838 to 66,219, losing over 1,600 points in the last three sessions of this truncated week.

Key indices Nifty 50 and Bank Nifty have also witnessed selling pressure this week. Nifty lost over 450 points in the last three sessions, while Bank Nifty dropped around 1,200 points during this time.

According to stock market experts, FIIs turning sellers, the US dollar gaining strength, the US Fed's hawkish rate stance, and rising crude oil prices have contributed to the negative sentiment in Indian stock market. as the majority of the Indian indices were either at record highs or near their lifetime highs. Equity markets that had hit new highs in a recent rally also witnessed profit booking amid limited upside.

"Due to the rise in crude oil prices in international market in recent sessions, the market was expecting inflation pressure on the US Fed leading to rise in speculation of a hawkish US Fed stance, which turned true in its meeting on Wednesday. Hence, expecting a rise in the US dollar, FIIs started fishing out money from assets like equities, gold, etc," said Prashanth Tapse, senior vice president — research at Mehta Equities.

Five triggers that dragged markets

Tapse said Indian stock market indices were already at a record high and were staring at profit booking. This happened with combination of factors -- rise in crude oil price, a firming US dollar against major global currencies, renewed inflation fear, the US Fed's hawkish stance and FIIs' sell-off.

FIIs have been net sellers this week as they sold shares worth ₹1,236.51 crore on Monday and ₹3,110.69 crore on Wednesday.

"US Fed decided to keep the interest rate unchanged but it raised median rates from 4.60 per cent to 5.10 per cent, which means chances of US Fed rate cut in short to mediuerm is minimal. This has put the market buzzing that there can be further rate hike in next year. This has put US dollar in uptrend while other assets like gold, gold ETF, equities, etc. under pressure," said Amit Sajeja, vice president — Research at Motilal Oswal.

Crucial levels for Nifty, Sensex, Bank Nifty

Investors should look out for the key support and resistant levels for indices while placing bets. "Sensex today has crucial support placed at 65,700 to 65,500 levels and it may go up to 68,000 in case of trend reversal. Similarly, Nifty today has major support placed at 19,600 to 19,500 levels and it has hurdle placed at 20,300 levels," said Sumeet Bagadia, executive director at Choice Broking.

Bagadia advises ‘buy on dip’s strategy for Indian stock investors. The Bank Nifty chart suggests major support around 44,500 to 44,300 levels whereas it may rise to 46,000 to 46,500 in case of stock market's rebound in near term, he said.

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