The important takeaway from January 23 sharp market correction is not the 1.54 per cent cut in Nifty but the crash in Nifty mid-cap and Nifty small-cap indices by 3.15 per cent and 2.87 per cent respectively, says V.K. Vijayakumar, Chief Investment Strategist, Geojit Financial Services.

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The valuations in the broader market had become excessive and unsustainable as pointed out many times recently, he said.

The trigger for the correction came mainly from the sustained selling by FIIs who have sold equity worth Rs 27,830 crore during the last five days, he added.

Some news and rumours also contributed to the selling in the market. There is news that SEBI is tightening the ultimate beneficiary norms for FPIs starting February 1st. This might have triggered some FPI selling. Also, there is a rumour floating around that the finance minister may tweak the LTCG tax taking away the advantages investors are enjoying now, he added.

Further selling by FPIs and more corrections in the broader market are likely. Investors may wait for the market to stabilise. Safety now is in fairly priced large caps, he said.

Deepak Jasani, Head of Retail Research, HDFC Securities said India's direct tax-to-GDP ratio hit a 15-year high of 6.11 per cent in 2022-23, hovering near its peak of 6.3 per cent reached in 2007-08, according to data released by the Central Board of Direct Taxes (CBDT). In 2022-23, direct taxes made up 54.62 per cent of the government's total tax revenue, up from 52.27 per cent in 2021-22 and 46.84 per cent in 2020-21.

After a gap-up opening of 145 points on the back of positive global cues, Nifty could not hold on to the gains and turned south. Nifty nosedived by more than 1.5 per cent to close at 21,238.

By breaking the previous swing low of 21,285, Nifty has conformed to lower top and lower bottom formation on the daily chart, which indicates a bearish trend reversal. Nifty is now headed towards the next support zone of 21,006 - 21,150. On the upside, 21,852 has become the ceiling in the Nifty for the short term, he said.

BSE Sensex is at 70,776.19 points, up 405.64 points or 0.58 per cent. SBI, Powergrid, Indusind Bank, Tata Steel are up 2 per cent.

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