Nifty, Sensex correct nearly 1 per cent in volatile trade—These 4 factors pulling down markets on Tuesday

Domestic equity markets have been trading with volatility after opening on a positive note on Tuesday. This is the fourth consecutive session when the markets are trading lower. Benchmarks Nifty50 and the S&P BSE Sensex declined more than 4 per cent around 11 am on Tuesday. The broader Nifty which declined to 17,043 was trading lower by 145.45 points or 0.84% to 17,068.15 around the same time.  

The Sensex dipped by 495.37 points or 0.86% to trade at 57,125.82 after hitting day's low of 57,058.77. All broader market and sectoral indices turned negative as the markets continued their free fall correcting around 1 per cent in the afternoon trade on Tuesday. The 12-share Nifty Bank was trading lower by almost 600 points to 37,406.70 as it slipped below 37,400 briefly too.  

There were several factors contributing to this fall on Tuesday, but below are the top three factors that are spooking the markets the most on Tuesday.  

FIIs, DIIs negative  

As Foreign Institutional Investors (FIIs) continued their selling spree, what affected the markets the most was Domestic Institutional Investors too pulling out the money from the equity markets. On February7, FIIs, who have been net sellers for the past few months in the Indian market, pulled out Rs 1,157.23 crore and remained net sellers at Rs 5,228.02 crore so far in February. In a major blow, DIIs, who have been net buyer with Rs 898.57 crore so far in February, too sold to the tune of Rs 1,376.49 crore on Monday.  

See Zee Business Live TV Streaming Below:

"The market has started discounting a hawkish Fed and the possible fallout from the Russia-Ukraine tensions. The former is partly discounted by the market while the latter is not. This uncertainty is likely to keep the market in uncharted territory in the short- term till clarity emerges on these issues. DIIs also turning sellers is a reflection of this concern," said V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services. 

Global Cues 

Major Asian markets traded flat to negative in the late morning trade on Tuesday. Japanese Nikkei 225 was trading flat with positive bias, while Hang Seng Index and Shanghai Composite were trading lower by 1.60% and 0.37% amid multiple factors, including anticipation of Fed rate hike, respectively. The US market too had ended mixed on Monday as the Dow Jones closed with 1.39% gain, Nasdaq Composite witnessed a cut of 0.58%, S&P500 declined by 0.37% and Russell 2000 was up 0.51%. 

RBI MPC Meet 

The Reserve Bank of India's monetary panel committee meeting commenced on Tuesday after being deferred by a day to mourn legendry singer Lata Mangeshkar's death on February 7. Fears that RBI may raise policy rates in the meeting was also weighing on the investors` sentiment the previous session. 

Correction in large-cap stocks  

Large cap stocks in FIIs portfolio have been witnessing huge correction off late. There is a sharp cut in FIIs' favorite names such as HDFC twins, ICICI Bank, Infosys, Kotak Bank, Reliance, etc .  

"An interesting trend in the market is that selling is in large-caps. High quality large-caps like the HDFC twins are hammered by the bears just because FIIs hold a large quantity of these stocks and the bears expect FIIs to sell them more, irrespective of their solid fundamentals and earnings visibility," V K Vijayakumar 

Such aberrations in the market can be buying opportunities for discerning long-term investors, the expert added.