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The Indian stock market experienced a downturn in the third consecutive week, primarily attributed to volatility stemming from a combination of factors. These include the imposition of additional tariffs by the United States on India, mixed corporate earnings reports, and persistent selling pressure from Foreign Institutional Investors (FIIs). This confluence of events has created a challenging environment for investors, leading to underperformance across various market indices. The broader indices, particularly the BSE Small-cap index, suffered more significant losses compared to the main indices, indicating a heightened sensitivity to the prevailing market headwinds among smaller capitalization companies. Specifically, the BSE Large-cap and Mid-cap indices each shed approximately 1 percent during the week, while the BSE Small-cap index declined by nearly 2 percent. This disparity suggests that smaller companies, which often have less financial resilience and greater exposure to domestic economic fluctuations, are more vulnerable to the negative impacts of tariffs and investor uncertainty. The benchmark indices also reflected the overall negative sentiment. The BSE Sensex index decreased by 742.12 points, equivalent to a 0.92 percent drop, closing at 79,857.79. Similarly, the Nifty50 index experienced a decline of 202.05 points, representing a 0.82 percent decrease, to finish at 24,363.30. These declines underscore the widespread nature of the market downturn, affecting both large-cap and mid-cap companies. The persistent selling activity by FIIs played a crucial role in exacerbating the market's decline. FIIs extended their selling spree for the sixth consecutive week, offloading equities worth a substantial Rs 10,652.47 crore. This continuous outflow of foreign capital reflects a lack of confidence in the Indian market, potentially driven by concerns about the impact of tariffs on export-oriented industries and the overall economic outlook. Despite remaining buyers on the final day of the week, the cumulative selling pressure from FIIs significantly weighed on market sentiment. In contrast to the FII selling, Domestic Institutional Investors (DIIs) continued their buying activity for the 16th consecutive week, providing some support to the market. DIIs purchased equities worth Rs 33,608.66 crore, partially offsetting the negative impact of FII outflows. The sustained buying by DIIs indicates a degree of confidence in the long-term prospects of the Indian economy, despite the current challenges. However, the magnitude of DII buying was not sufficient to completely counteract the impact of FII selling. Looking at the month of August so far, the trend of FII selling and DII buying remains consistent. FIIs have sold equities worth Rs 14,018.87 crore, while DIIs have purchased equities worth Rs 36,795.52 crore. This disparity highlights the divergence in investment strategies between foreign and domestic investors, with DIIs demonstrating a greater willingness to invest in the Indian market despite the prevailing headwinds. The sectoral performance within the market was mixed, with some sectors exhibiting resilience while others faced significant challenges. Nifty Pharma, Realty, FMCG, and Healthcare sectors experienced gains of approximately 2 percent each, indicating strong underlying demand and positive investor sentiment in these areas. Additionally, PSU Bank, Media, and Metal sectors rose by 0.5-1.5 percent, suggesting moderate growth potential. However, the overall market sentiment remained cautious due to the broader economic concerns. A significant number of small-cap stocks experienced substantial declines, with more than 40 companies dropping by 10-24 percent. This highlights the vulnerability of smaller companies to negative market sentiment and external economic shocks. Specific companies that experienced significant declines include PG Electroplast, Kitex Garments, Unichem Laboratories, Morepen Laboratories, Advait Energy Transitions, KR Rail Engineering, Faze Three, and Advanced Enzyme Technologies. These declines underscore the heightened risk associated with investing in smaller capitalization companies during periods of market uncertainty. Conversely, some companies managed to buck the trend and experienced positive gains. Sarda Energy and Minerals, Timex Group India, Sanghvi Movers, Zinka Logistics Solutions, Centum Electronics, KRBL, Baazar Style Retail, Godfrey Phillips India, and Entertainment Network India gained between 12-21 percent. These companies likely benefited from specific factors, such as strong earnings reports, positive industry trends, or strategic initiatives that resonated with investors. The overall market outlook remains uncertain, with analysts advising investors to closely monitor global trade developments, corporate earnings, and upcoming inflation data from both India and the US. The Indian equity market has been in a phase of consolidation since July, reflecting weakening investor sentiment due to trade-aligned challenges. Concerns over steep US tariff rates and underwhelming quarterly earnings have dampened market confidence. Persistent selling by FIIs, particularly in pharma stocks with significant US exposure, underscores this cautious outlook. The continued depreciation of the INR has also added to investor anxiety. Despite these headwinds, downside risks were partially cushioned by the Reserve Bank of India's (RBI) reaffirmation of macroeconomic stability, its optimistic stance on domestic growth, and early signs of easing inflation. Market volatility is expected to persist in the near term. While risks from US trade tensions and sustained FII outflows remain, potential support from DIIs could offer some relief.
Looking ahead, the trajectory of the Nifty50 index is subject to considerable uncertainty, with analysts offering differing perspectives on potential support and resistance levels. Ajit Mishra, SVP of Research at Religare Broking, highlights the lingering uncertainty surrounding the tariff situation and the continued selling pressure from FIIs as key factors weighing on market sentiment. He notes that the 100-day EMA (Exponential Moving Average) near the 24,600 mark, which previously served as a support level, is now acting as an immediate resistance. A close below 24,450 would signal a continuation of the corrective phase, potentially leading to a retest of the 200-day EMA near 24,200. Mishra advises traders to align their positions accordingly, emphasizing the importance of risk management in the current market environment. Rupak De, Senior Technical Analyst at LKP Securities, echoes the bearish sentiment, noting that the Nifty's southward movement was triggered by its failure to sustain above the 50 EMA on the hourly chart, indicating prevailing selling pressure. He further points out that the index closed below the crucial support level of 24,400, highlighting the strength of the bears. According to De, the sentiment is already tilted in favor of the bears, with the index forming a lower-top, lower-bottom pattern. He believes that the short-term trend remains weak, with potential downside towards 24,150–24,200. On the higher side, he identifies resistance at 24,475–24,500. Nagaraj Shetti, Senior Technical Research Analyst at HDFC Securities, corroborates the negative outlook, emphasizing the sharp selloff on Friday that completely negated the bullish sentiment created on Thursday. He observes that a long bear candle was formed on the daily chart, while a long negative candle has been formed on the weekly chart for the sixth consecutive week. Shetti interprets the formation of long upper shadows in the last 4-5 weekly candles as a signal of sell on every rise in the market. He concludes that the underlying trend of Nifty continues to be weak and anticipates the next lower levels to be around 24200-24000 by next week. Shetti suggests that any pullback up to the hurdle of 24500 could be viewed as a sell on rise opportunity. These analyses highlight the prevailing bearish sentiment in the market and caution investors to be prepared for further downside risk. The emphasis on technical analysis and the identification of key support and resistance levels provide valuable insights for traders looking to navigate the current market volatility. The recommendations to prioritize risk management and consider sell on rise strategies further underscore the need for a cautious approach in the face of ongoing uncertainty. The contrasting perspectives on potential support and resistance levels reflect the inherent challenges in predicting market movements, highlighting the importance of conducting thorough research and making informed investment decisions. The disclaimer provided by Moneycontrol.com emphasizes the importance of seeking advice from certified experts before making any investment decisions, underscoring the need for individual investors to exercise caution and conduct their own due diligence. The overall message is one of caution and vigilance, with analysts advising investors to closely monitor market developments and adjust their strategies accordingly.
In summary, the Indian stock market is currently grappling with a confluence of challenges, including the imposition of tariffs by the United States, persistent selling pressure from Foreign Institutional Investors (FIIs), mixed corporate earnings reports, and concerns about the global economic outlook. These factors have contributed to a decline in market indices, particularly the BSE Small-cap index, which has been more vulnerable to the prevailing headwinds. While Domestic Institutional Investors (DIIs) have provided some support to the market through sustained buying activity, their efforts have not been sufficient to completely offset the negative impact of FII outflows. The sectoral performance has been mixed, with some sectors exhibiting resilience while others have faced significant challenges. The overall market outlook remains uncertain, with analysts advising investors to closely monitor global trade developments, corporate earnings, and upcoming inflation data from both India and the US. The trajectory of the Nifty50 index is subject to considerable uncertainty, with analysts offering differing perspectives on potential support and resistance levels. The prevailing bearish sentiment in the market underscores the need for a cautious approach, with investors advised to prioritize risk management and consider sell on rise strategies. The emphasis on technical analysis and the identification of key support and resistance levels provide valuable insights for traders looking to navigate the current market volatility. The recommendations to seek advice from certified experts before making any investment decisions further highlight the need for individual investors to exercise caution and conduct their own due diligence. The overall message is one of caution and vigilance, with analysts advising investors to closely monitor market developments and adjust their strategies accordingly. The confluence of global and domestic factors is creating a complex and challenging environment for Indian investors. The ongoing trade tensions between the United States and India are likely to continue to exert downward pressure on the market, particularly on export-oriented industries. The persistent selling by FIIs reflects a lack of confidence in the Indian market, potentially driven by concerns about the impact of tariffs and the overall economic outlook. The mixed corporate earnings reports add to the uncertainty, with some companies performing well while others struggle to meet expectations. The upcoming inflation data from both India and the US will be closely watched by investors, as it will provide insights into the potential direction of monetary policy. The overall market outlook remains uncertain, with analysts advising investors to remain cautious and prioritize risk management. The need for vigilance and informed decision-making is paramount in the current market environment. Investors should carefully consider their individual risk tolerance and investment objectives before making any decisions. The information provided in this article is intended for informational purposes only and should not be construed as investment advice.
Source: More than 40 small-cap stocks drop 10-24% amid tariff concerns