The index had recovered more than 370 points from its recent swing low of 23,116 before Thursday’s sharp decline. The latest fall was the Nifty’s biggest one session percentage decline since July 8, when the index fell 2.12%.
The Nifty opened around 225 points lower and remained under pressure throughout the session, with selling intensifying towards the close.
Financial stocks bore the brunt of the selling after the Insurance Regulatory and Development Authority of India’s consultation paper on insurance distribution reforms proposed changes to commissions, expenses, incentives and distribution practices.
PB Fintech, which fell around 36%, Turtlefin, which declined 20%, and Max Financial Services, which dropped around 10%, came under heavy selling pressure following the release of the consultation paper.
Among Nifty constituents, Cipla, Oil and Natural Gas Corporation and NTPC were the top gainers. HDFC Life Insurance, Bajaj Finance and Axis Bank were among the biggest losers.
All sectoral indices ended lower. Nifty Financial Services declined 2.39%, while Nifty Private Bank and Nifty Bank fell 2.19% and 1.96%, respectively. Nifty Metal was also among the major sectoral laggards.
The broader market also witnessed sharp selling, with the Nifty Midcap 100, Nifty Smallcap 100 and Nifty Microcap indices declining 2.25%, 1.53% and 1.48%, respectively.
The selloff came amid weak global cues, rising crude oil prices and higher US Treasury yields. Brent crude moved above $100 a barrel, while the US 10 year Treasury yield remained elevated, adding to concerns around inflation and the global interest rate outlook.
The rupee also remained under pressure, ending around 95.96 against the US dollar, weighed down by weakness in domestic equities and broader concerns around crude prices and global yields.
Nifty outlook
HDFC Securities’ Nagaraj Shetti said the short term trend has turned sharply negative. According to Shetti, a decisive break below 23,000 could drag the Nifty towards 22,600 in a short period, while any rebound could face resistance around 23,300.
Nandish Shah of HDFC Securities said the breakdown has pushed the Nifty below the lower boundary of its recent 23,100 to 23,600 consolidation range.
According to Shah, positional support is placed around 22,700, while 23,300 has emerged as the immediate resistance. The 23,500 to 23,600 zone is likely to act as a stronger hurdle.
LKP Securities’ Rupak De attributed the selling pressure to weak overnight global cues, higher US 10 year Treasury yields and rising crude prices. He sees immediate support at 23,000, followed by 22,700, while resistance is placed at 23,200.
Bank Nifty outlook
The banking index also saw renewed selling pressure, forming a bearish candle and closing below the low of the previous 10 trading sessions. Bank Nifty ended 1.96% lower at 55,438.50.
Sudeep Shah of SBI Securities said the 55,000 to 54,900 zone will be an important support area for Bank Nifty. A sustained break below 54,900 could open the way towards 54,500. On the upside, the 55,900 to 56,000 zone is likely to act as the immediate resistance.
Going ahead, market participants will track crude oil prices, US Treasury yields and developments around the US Iran situation, along with the impact of the proposed insurance distribution reforms on financial stocks.
Key global cues include US weekly jobless claims and the Bank of Japan’s inflation data.