Indian equity markets faced sharp selling pressure on Monday, with the Sensex plunging 501 points to settle at 82,156 and the Nifty 50 slipping 145 points to close at 24,984, falling below the key 25,000 mark. Investor sentiment was weighed down by a mix of global and domestic cues.
Here are the five key reasons behind today’s market correction:
1. Global Market Weakness
Global markets, particularly in Asia and Europe, showed signs of risk aversion due to renewed concerns around inflation, US Fed rate outlook, and uncertainty surrounding geopolitical developments. This prompted investors to adopt a cautious stance, triggering selling pressure in Indian equities.
2. IT Sector Drag
Information Technology stocks led the decline, following disappointing earnings guidance and margin pressures from major players. The Nifty IT index dropped over 1.5%, dragging down broader market indices. Persistent weakness in the US tech sector also affected domestic sentiment.
3. FII Selling
Foreign institutional investors (FIIs) were net sellers in today’s session, pulling out capital amid global uncertainty and profit-booking. The recent rally in Indian markets had made valuations relatively stretched, prompting FIIs to reduce exposure.
4. Citi Downgrade of Indian Market
Global investment bank Citi downgraded Indian equities to ‘neutral’, citing stretched valuations and concerns about the market rally sustaining at current levels. This downgrade spooked investors and led to a sell-off in frontline stocks.
5. Pre-Expiry Volatility
Being the start of the expiry week for July derivatives, markets witnessed heightened volatility. Traders opted to unwind positions ahead of the expiry on Thursday, leading to increased intraday pressure and a broad-based decline.
Market Outlook
While the correction today reflects near-term caution, analysts remain optimistic about India’s long-term growth story. However, market participants are advised to remain selective, focus on quality stocks, and brace for continued volatility in the short term.
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