Check Why Stock Indices Drop Sharply After Rising on Opening Day

The domestic equity market declined after initially rising, mirroring volatility brought on by the monthly F&O expiration and worries over the price of crude oil. The BSE Sensex, which started the day 287 points higher, dipped steadily during the course of the session until ultimately settling nearly 600 points down at 65,508.32. Also failing to hold levels above 19,750, the NSE Nifty ended the day approximately 193 points down at 19,523.55.

L&T, PowerGrid, Bharti Airtel, Axis Bank, and State Bank of India (SBI), which saw gains of up to 1.69 %, were the only five shares on the BSE Sensex to finish in the green out of the 30 total shares traded. Tech Mahindra, Asian Paints, Wipro, Mahindra & Mahindra, and Infosys were the biggest laggards, each losing up to 4.59 percent.

According to Religare Broking Ltd.’s senior vice president of technical analysis, Ajit Mishra, “Markets resumed a bearish tone after the previous respite and dropped over 1% on the monthly expiration day. After a flat start, Nifty slowly moved down during the day before settling at 19,523.55 levels. The drop was broad across all industries, with FMCG and IT among the biggest losers.

The wider indexes also saw pressure, with smallcap closing slightly lower and midcap losing more than 1%.

The selling was widespread because investors are on high alert due to the increase in oil prices, according to Vinod Nair, head of research at Geojit Financial Services. Crude will threaten inflation and boil the operating margins if it continues to trade over $90. The future trajectory will be determined by US GDP figures and the US Fed chief’s speech, which will be closely monitored worldwide. FIIs are now continuing to engage in selling due to the increasing interest rates and US bond yields.

At $95.95 a barrel on Thursday, Brent oil was down 0.53 percent but is still trading over the $90 threshold. To 106.4, the dollar index fell by 0.24 percent.

BNP Paribas

A revival of pessimistic sentiment was seen in the Bank Nifty, according to Kunal Shah, senior technical & derivative analyst at LKP Securities: “The bears grabbed control and drove the index down. The 20-day moving average (20DMA), which is placed at the 45,000 level, has developed strong resistance.The 44,200 level serves as the index’s nearest level of support on the downside, and a break below it might lead to further selling pressure and a possible drop to the 43,800 level. As long as the index is below the 45,000 level in this case, it is prudent to retain a “sell on rise” strategy.