As of 1 PM, the Nifty 50 is trading with losses of over 200 points, while the Sensex is down close to 700 points. 40 out of the 50 Nifty constituents are trading with losses currently.
Before the fall on Tuesday, the Nifty 50 had made an intraday high of 24,530, which was an upmove of nearly 700 points from the June 30 close of 23,865.
Here are the possible factors why the markets are trading with losses:
Routine Profit Booking
After a near-700-point upmove since the start of July, the market participants could be looking to take some profits off the table, ahead of the start of the quarterly results season.
Technical Factors
Technical factors could also be attributed to the fall, as the 24,500 level appeared to be a key resistance zone for the Nifty. The index crossed that level on Tuesday, made a high of 24,530, but failed to sustain at or above those levels.
Going into Tuesday’s session, which also happened to be the Nifty weekly expiry, the Nifty Put-Call Ratio had crossed levels of 1.3, which was indicating that the market was nearing overbought zones.
As per Tuesday’s F&O data, the highest Open Interest was placed at the 24,500 strike Call, which has now moved lower to the 24,300 strike.
Flare Up in West Asia
After days of ceasefire, reports began to emerge of commercial vessels being attacked once again in the Strait of Hormuz during transit, which also prompted the US forces to launch retaliatory strikes on Iran.
The developments resulted in a sharp upmove in crude oil prices. Brent Crude, which had given up all the Iran war gains late last month, rebounded back to trade above the mark of $76 a barrel.
Although prices have not risen alarmingly and are still significantly below the Iran war high of $125, any rise in oil prices is negative for Indian equities as the country is a net importer.
Shares of Oil Marketing Companies like HPCL, BPCL and Indian Oil, along with other crude sensitives like Paint stocks are trading with losses in today’s session.
Underperformance Of Nifty Bank
The Nifty Bank has been a major contributor to the Nifty managing to first cross the 24,000 mark and then head further higher. While the index took a break last week with IT leading the Nifty move higher, the index did well on Tuesday, but is again facing selling pressure at higher levels.
All but one stock on the Nifty Bank are trading with losses on Wednesday, with the index now trading below the 58,000 mark, heading back towards the lower end of the 57,500 – 58,500 range.
Thursday will be the weekly options expiry of the Sensex contracts, as well as the first full day of the current results season, with TCS, Anand Rathi Wealth and GM Breweries reporting numbers. Later tonight, markets in the US will be reacting to the minutes of the recent FOMC meet and of course, the developments surrounding West Asia.
Even as the Nifty and Sensex are down close to a percent, the broader markets are resilient. The Nifty Midcap and Smallcap indices are trading around the flat line after recovering from their respective lows, but despite that, the Advance-Decline ratio continues to remain on the side of those declining.
