Profit booking continued at the bourses on Tuesday as investors sold stocks across sectors. The S&P BSE Sensex fell 384 points, or 0.52 per cent, to end at 73,512 levels. It hit an intraday low of 73,259.
The Nifty50, on the other hand, ended near the 22,300 at 22,303, down 140 points or 0.62 per cent. The index slipped to a low of 22,232 during the day.
Power Grid, IndusInd Bank, Tata Motors, JSW Steel, HCL Tech, NTPC, Tata Steel, ICICI Bank, M&M, Axis Bank, Reliance Industries, HDFC Bank, and Ultratech Cement were the top laggards on the 30-stock index, sliding between 1 per cent and 4 per cent.
HUL, Tech M, Nestle India, TCS, ITC, Kotak Bank, and Infosys, on the other hand, lent some support with up to 5.6 per cent gain.
The broader markets, too, bled heavily with the BSE MidCap, and SmallCap indices dipping up to 3 per cent intraday. They ended 1.9 per cent, and 1.65 per cent lower, respectively.
Among sectors, the Nifty FMCG index advanced 2 per cent, while the Nifty IT added around 1 per cent. All other sectoral indices ended in the negative zone led by the Nifty Realty index (down around 3.5 per cent).
Why are Indian markets underperforming?
A significant near-term trend in the market is the underperformance of the Indian market despite positive global cues. The Dow has been trending up for four consecutive trading sessions, but the Nifty has turned highly volatile and apprehensive. What might be the reasons for this?
One is the selling by FIIs which touched Rs 5525 crores in the three trading sessions in May so far. But there is nothing unusual about this since FIIs sell when the US bond yields are attractive. Perhaps, the more significant factor might be the apprehensions emanating from the unexpectedly low turnout in the elections, so far. One view is that the definite and smooth victory of the ruling dispensation is a bit uncertain now. The market which has already discounted a BJP/NDA victory is a bit unsure now. Perhaps, this can be the reason for the apprehension in the market and the bulls shedding their aggressive stance. In the last one month the VIX has spiked by 46% and is hovering around 16.6 now. This means volatility and uncertainty will continue for some time.
— Dr. V K Vijayakumar, Chief Investment Strategist, Geojit Financial Services
India VIX hit 17 today – What does this volatility index indicate and what should investors do in such a situation?
Santosh Meena, Head of Research, Swastika Investmart Ltd, explained that the India VIX, a volatility gauge often nicknamed the “fear index,” has surged over 70% since its April 23rd low of 10. This rise aligns with historical trends, as the VIX typically climbs before major events like general elections. In 2019, it saw a 150% jump (from 12 to 30), and in 2014, it spiked 212% (from 12.5 to 39). Based on this historical context, a further increase in the VIX is likely, with a potential move towards 25 before the election results.
“Two key factors are driving the VIX’s rise. First, portfolio investors are buying protective put options to hedge their holdings. Second, traders are speculating on significant price movements post-election by purchasing both calls and put options,” Meena added.
Global Cues
Asian shares made 15-month highs on Tuesday on renewed confidence of US interest rate cuts, while traders waited on a policy meeting in Australia later in the day and had a close eye on a falling yen.
US stock indexes closed higher on Monday, their third straight session of advances, as investors continued to gain hope that there was a greater chance of the Federal Reserve cutting interest rates this year.
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