Sensex drops 300 points, Nifty 50 ends below 23,800. What drove the market down? Explained | Stock Market News
The Indian stock market ended in the red for the fifth consecutive session on Friday, 24 July, as higher oil prices due to the US-Iran conflict continued weighing on market sentiment.
On Friday, the Sensex closed 332 points, or 0.43%, lower at 76,059.77, while the Nifty 50 ended at 23,767.45, down 102 points, or 0.43%. The Nifty Midcap 100 index slipped 0.10%, while the Smallcap 100 index dropped 0.32%.
As many as 36 stocks ended in the red in the Nifty pack, with Eternal, Bajaj Finance, and Mahindra and Mahindra losing the most.
On the other hand, HCL Tech, Cipla, and Wipro ended as the top gainers in the index.
Among the sectors, Nifty Auto lost 1.10%, while Metal, Realty, and Oil and Gas declined by 0.50%.
On the other hand, Nifty Media jumped almost 2%. IT (up 0.82%) and PSU Bank (up 0.58%) also clocked healthy gains. Nifty Bank rose 0.18%.
For the week, the Sensex lost nearly 2,100 points, or 2.7%, while the Nifty shed 2.3%.
Here are five key factors behind the fall in the Indian stock market
Crude oil prices extended gains for the sixth consecutive session on Friday, with Brent crude September Contract touching the $101 per barrel mark. So far this week, Brent crude has gained 15% after a 16% jump in the previous week. After falling for the last three consecutive months, Brent crude is now up nearly 40% so far in July.
Rising oil prices have revived concerns over their negative impact on the Indian economy, inflation trajectory, and corporate earnings, weighing on stock market sentiment.
"The attack on Saudi tankers by the Iran-backed Houthis in the Red Sea is the main reason for the recent sharp spike in Brent crude to about $100. Such a high price is bound to revive India’s balance of payments (BoP) concerns," VK Vijayakumar, Chief Investment Strategist, Geojit Investments, noted.
The market is anxious as the end of the ongoing US-Iran conflict is not in sight. As per media reports, US President Donald Trump is considering launching a new major military operation against Iran. Meanwhile, the US military said late on Thursday it completed its latest round of strikes on Iran that marked a 13th consecutive night of American attacks.
The New York Times reported that Iran rejected the US President's renewed ceasefire proposal, delivered through Iraqi Prime Minister Ali al-Zaidi, on Thursday (local time).
US bond yields have been rising in the US, aggravating the risk of heavy foreign capital outflows from emerging markets like India. The benchmark US 10-year bond yield has jumped by 6.5% this month so far, to 4.711%.
When the US bond yields rise, foreign investors tend to withdraw funds from emerging markets' equities and invest in safer debt instruments back home.
"The spike in the US 10-year yield to 4.7% is negative for equity markets globally. This is a near-term risk," said Vijayakumar.
Trump's tariff salvo against the trading partners of the US is back.
In the past two weeks, the US administration has announced tariffs of 25% on Brazil, 50% on Canada and up to 200% on generic drugs, and on Thursday, tariffs of 10% to 12.5% across as many as 60 trading partners.
The US announced new tariff rates of 10% and 12.5% on several countries under Section 301, with India placed in the lower 10% category.
The new US tariff rates have reinforced the view that tariffs remain central to Trump's policy agenda, fuelling concerns that they could weigh on the global economy while boosting US inflation, thereby keeping interest rates higher for longer.
Nifty continues trading below 24,000, and on Friday, it even breached 23,700 in intraday trade.
As per SBI Securities, the immediate support for Nifty is placed in the 23,650-23,600 zone.
"Any sustainable move below this zone could result in Nifty extending its weakness until 23,450, followed by 23,300 in the short term. On the upside, the immediate resistance for Nifty is placed in the 23,950-24,000 zone, which coincides with the 50-day EMA," said the brokerage firm.
Vipin Kumar, AVP-Research at Globe Capital Market, pointed out that the current chart texture remains negative as long as the index stays below 23,900 on a closing basis. Therefore, we suggest maintaining a 'sell on rise' strategy below this resistance level.
Disclaimer: This article is for educational purposes only and does not constitute investment advice. The views and recommendations expressed are those of individual analysts or broking firms, not Mint. We advise investors to consult with certified experts before making any investment decisions, as market conditions can change rapidly and circumstances may vary.
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