Banking stocks were among the worst hit on Friday as Sensex and Nifty tumbled 2% each. The Bank Nifty, PSU Bank and Private Bank indices were the top losing sectoral indices on the NSE. The 30-share BSE Sensex tanked over 1200 points, falling below 59,000 points, and NSE Nifty 50 fell 400 points to below 17,500. Bank Nifty fell 1296 pts or 3.11% to 40,351.65 with Bank of Baroda, Punjab National Bank, and State Bank of India shares dropping the most.
Why are Sensex, Nifty, Bank Nifty falling today?
Short seller Hindenburg’s report on Adani dragged banking stocks lower
Hindenburg Research’s report dented market sentiment with domestic indices being under intense selling pressure as the stock market chaos continues in the Adani Group. The report raised red flags about Adani’s debt which may have led to a fall in banking stocks. “The group has high debt, which is having a sentimental impact on the banking space; therefore, we are seeing a sharp sell-off in banking stocks, especially in PSU names. Bank Nifty has surrendered its 100-DMA of 41,500, which led to multiple stop losses being triggered, which is adding further selling pressure. Technically, 40,000 is a psychological support level for Bank Nifty, while 39,500 is a critical support level. If Bank Nifty manages to bounce back from the 40,000-39,500 zone, then we can expect a bounceback. However, Bank Nifty needs to come back above 42,000 for any meaningful recovery,” said Santosh Meena, Head of Research, Swastika Investmart Ltd.
Investors remain nervous ahead of Budget
The volatility in the markets has increased as we move closer towards the budget. “Bank Nifty underperformed the Nifty index in January series as it corrected by 1600 points from 43,252 to 41,647 zones. It closed at the lowest levels of the last 50 trading sessions. It has recently taken a setback which is giving some concern to the Indian market ahead of the Union Budget 2023. Long liquidation was seen in the January series as open interest decreased by 12.31% and the price was down by 3.71% on an expiry-to-expiry basis. Rollover in Bank Nifty stood at 84%, which is lower than its quarterly average of 86.2%. It has major support near to 41500 zones and a hold below it could take this index towards 40,800 and 40,500 zones while resistance exists at 42,222 zones,” said Chandan Taparia, Head – Technical & Derivatives Research at Motilal Oswal Financial Services.
Foreign institutional investors continue to be net sellers
Foreign institutional investors have sold equities worth a net Rs 23,254.43 for the month till January 25. Even on Wednesday, FII offloaded shares worth a net Rs 2393.94 crore. The continuous withdrawal of FII funds from Indian markets has impacted market sentiment.
UN cuts India’s GDP growth forecast
The market sentiment also remained negative after United Nations (UN) cut its GDP growth forecast for India for the calendar year 2023 to 5.8%, citing the effect of tighter monetary policy and weak global demand. “Growth in India is expected to remain strong at 5.8%, albeit slightly lower than the estimated 6.4% in 2022, as higher interest rates and a global slowdown weigh on investment and exports,” the UN’s World Economic Situation and Prospects 2023 report, published on 25 January, said.
Crude oil prices rise in hopes of increasing demand in China
Crude oil prices rose in hopes that the reopening of the Chinese economy would boost demand. Brent futures gained 30 cents, or 0.3%, to $87.66 a barrel, while U.S. crude rose 21 cents to $81.22 per barrel, a 0.3% gain.