Indian benchmark equity indices Sensex and Nifty closed in the red on Tuesday, driven by a combination of factors that led to a broad-based selling pressure in the market. The BSE benchmark Sensex plunged 693 points or 0.87% to settle at 78,956, while the broader NSE Nifty dropped 208 points or 0.85% to end at 24,139.
The primary reason for the market downturn was attributed to HDFC Bank, India’s top private lender and the heaviest stock in the Nifty 50, which fell 3.4%. The decline in HDFC Bank’s stock price was a result of a staggered adjustment of its weight on a key MSCI emerging market index. Global indices provider MSCI raised the proportion of HDFC Bank’s shares available for purchase by overseas investors in two stages, in August and November, contrary to market expectations of a single move this month. This adjustment is expected to result in lower-than-expected inflows into HDFC Bank, impacting the overall market sentiment.
From the Sensex pack, HDFC Bank alone contributed to a 378-point decline, while other heavyweights such as SBI, ITC, Tata Motors, and Bajaj Finance also weighed on the index. As a result, the market capitalization of all listed companies on BSE dropped by Rs 4.45 lakh crore to Rs 445.37 lakh crore.
Market sentiment was further influenced by upcoming key data releases, including US producer price data for July and the US consumer price index (CPI) data for July. The CPI data is anticipated to show a 0.2% month-on-month increase in inflation, which could impact global markets and investor sentiment.
Experts in the field shared their views on the market situation. Vinod Nair, Head of Research at Geojit Financial Services, highlighted the lackluster growth in the major manufacturing sector and persistent selling by FIIs as contributing factors to the market decline. Aditya Gaggar, Director of Progressive Shares, advised caution and suggested waiting for the index to provide a clear picture before making any significant investment decisions.
On the global front, MSCI’s broadest index of Asia-Pacific shares outside Japan rose 0.15%, while European markets showed a slight increase as investors awaited US producer prices data. In the oil market, prices steadied after rising for five consecutive sessions, with concerns about demand growth in 2024 due to softer expectations in China.
In the currency market, the Indian rupee ended nearly unchanged against the dollar, closing at 83.97. Intervention by the central bank helped prevent a fall to the key psychological support level of 84 to the dollar.
Overall, the market’s performance on Tuesday reflected a combination of domestic and global factors that influenced investor sentiment and trading activity. As the market continues to navigate through uncertainties, investors are advised to stay informed and exercise caution in their investment decisions.