Bank, IT stocks drag key indices down 1%; Nifty slips below 18k

Mumbai: Two of India's key indices retreated Tuesday, wiping out blockbuster gains of the previous session, dragged down by a selloff in financials and IT stocks. The indices lost more than 1%, with the Nifty slipping below 18,000, as hawkish comments from two Fed Reserve officials Monday ahead of key US consumer inflation data pushed markets onto the backfoot.

The Sensex closed at 60,115.48, down 631.83 or 1.04%, after breaching 60,000 earlier in the session. The Nifty fell 187.05 points, or 1.03%, to end at 17,914.15. The Nifty has a crucial support at 17,650-17,700 levels, about 1.5% away from Tuesday's closing, analysts said.

Foreign portfolio investors (FPIs) sold shares worth a net ₹2,109.34 crore in the cash segment on Tuesday, according to provisional data from the stock exchanges. The exodus has continued for six sessions with foreign funds having sold shares worth ₹5,128 crore since the start of 2023, an indication of the shifting of positions to cheaper emerging markets.

DIIs buy shares worth Rs 1,806 cr
"A lot of foreign institutions are switching their bets to relatively inexpensive markets such as Hong Kong and China," said Abhilash Pagaria, head, alternative and quantitative research, Nuvama Institutional Equities. "Broader markets remain weak and valuations are still at a premium. Domestic funds buying is providing a cushion to our markets at the moment."

Domestic institutional investors bought shares worth a net Rs 1,806.62 crore on Tuesday. Since the start of the year, local funds have purchased shares worth Rs 6,287 crore.

Pagaria described the movement in the market as "range-bound" and the "traders' market" may not provide many opportunities for long-term investors now, given the rich valuations. "We do not anticipate a strong rally in the near-term. Still some time before global and local macro situations become more clear," he said.

The rally in global markets fizzled out with Asian shares ending mixed while European markets ended weak after two Federal Reserve officials - Raphael Bostic and Mary Daly - raised the possibility that the US central bank could raise key interest rates to above 5% and hold them for a considerable time.

On Tuesday, US stocks shrugged off Federal Reserve chairman Jerome Powell's speech that did not give any clear indication about the US central bank's path of future rate hikes. Instead, investors are awaiting the consumer price data due to be released Thursday.

Key US indices - Dow Jones Industrial Average, Nasdaq and S&P 500 - were up 0.1% at press time.

"Tuesday's fall is part of the large picture where markets remain uncertain due to global macroeconomic situations," said Nischal Maheshwari, CEO, institutional equities, Centrum Broking. "FPIs continue to sell and the money is moving to cheaper markets like China. One should avoid taking fresh positions and wait for the dust to settle down."

Back home, India VIX - a measure of traders' expectations of near-term risks - surged 5.85% on Tuesday to 15.51.

As many as 22 out of 30 Sensex companies ended in the red. Bharti Airtel was the top loser followed by State Bank of India, the HDFC twins, ICICI Bank, Bajaj Finance and UltraTech Cement. Index heavyweight Tata Consultancy Services (TCS) fell more than 1% after a mixed third-quarter earnings combined with a cautious commentary. Falling stocks outnumbered rising ones on the BSE by 2,189 to 1,329.