The Nifty 50 index experienced its worst intraday drop in the last two months, shedding 1.15% in value, during Wednesday's trade, with 40 out of the 50 constituents finishing the trade in the red. Among these, HDFC Bank, the index heavyweight, led the losses with a drop of 4%, while Reliance Industries, another heavyweight on the index, fell 2.22%.
Other stocks such as JSW Steel, BPCL, SBI Life, Dr Reddys, UltraTech Cement, HDFC Life, Hero MotoCorp, Maruti Suzuki, Tata Steel, Adani Ports SEZ, and Britannia experienced decline ranging from 1.5% to 2.7%.
This decline was primarily attributed to several factors exerting downward pressure on investor sentiment. One key driver of this market turmoil was the escalating yields of US government bonds, which sparked concerns among investors.
The US 10-year yield hit a 16-year high ahead of the Federal Reserve policy meeting on Wednesday. The market expectation was that the Fed would maintain the federal funds rate at a high of 5.25% to 5.5% following a 25 basis point increase in July, as it aimed to assess the impact of elevated borrowing costs on inflation.
However, the central bank was expected to leave the door open for another rate hike as early as November, according to Trading Economics.
Among sectoral indices, the Nifty Metal and Nifty Bank index stood as the top laggards with a drop of 1.63% and 1.30%, respectively. The drop in HDFC Bank came after the lender said its completed merger with HDFC Ltd. would hit key financial metrics, including its margins and bad loan ratios.
On the technical front, Rupak De, senior technical analyst at LKP Securities, said, "Nifty has dipped below its previous swing high on the daily chart, indicating a decline in bullish sentiment. Following a period of consolidation, the index experienced a correction, which could be considered as an early indication of a bearish reversal."
"Additionally, a negative crossover is evident on the daily RSI. In the short term, it is probable that the Nifty will decrease towards the 1970–19630 range. Selling on rallies might remain a favourable strategy as long as the index remains below the 20,000 mark," he added.
"The domestic markets remained under pressure due to rising US bond yields and a stronger greenback. Concerns reigned over the upcoming FED policy, interest rate trajectory, and rising oil prices. Bank Nifty underperformed today due to rising costs of funds and a reduction in deposits, leading to a moderation in net yield," said Vinod Nair, Head of Research at Geojit Financial Services.
Ahead of the US Fed policy meeting, crude oil prices tumbled in trade, with Brent crude futures falling by 0.81% to $93.52 a barrel, while WTI crude futures dipped by 0.73% to $89.52 a barrel.
On the currency front, the Indian rupee displayed a recovery, gaining 24 paise against the US dollar in Wednesday's trading session. This rebound came after the rupee had hit an all-time low of ₹83.32 in the previous trading session. Higher oil imports have increased pressure on the rupee, and the FPI outflows in September also weighed on the domestic unit.
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