Sensex drops 266 points, Nifty slips below 23,500 as markets decline for 6th consecutive session

Indian equities fell for the sixth consecutive session on Thursday, November 14, as concerns over weak global trends, a rising dollar index, rupee depreciation, and sustained selling by foreign investors took a toll. The Sensex dipped 266 points, or 0.34 per cent, to touch an intra-day low of 77,424.81, while the Nifty slipped 116.25 points, or 0.5 per cent, reaching 23,486.10. Both benchmarks have corrected over 10 per cent from their September highs, and the past six sessions alone have eroded more than 4 per cent of their value.

 Broader markets outperform but sentiment remains cautious

Despite the dip in frontline indices, broader markets displayed resilience. The Nifty Midcap index rose 0.55 per cent, while the Nifty Smallcap index gained 0.85 per cent, outpacing their large-cap counterparts. Sectoral indices were mixed, with Nifty Media leading the gains, up by 1.5 per cent. Realty, Auto, and Pharma indices also finished in the green, while Nifty FMCG, Oil & Gas, and Financial Services recorded losses.

Key factors behind market decline

1. Weakening Rupee: The rupee hit a new low of 84.40 against the dollar, driven by consistent foreign fund outflows and a strengthening dollar. Forex analysts highlighted significant volatility, pushing the USD-INR pair close to its all-time lows.
   
2. Strong Dollar and Bond Yields: The dollar index surged to 106.61, the highest since July, alongside a rise in the U.S. 10-year bond yield to 4.48 per cent. This has created significant headwinds for emerging markets like India, causing a shift in foreign investments.
   
3. Persistent FPI Selling: Foreign Portfolio Investors (FPIs) extended their selling streak for the 32nd consecutive session, offloading shares worth Rs 364.35 crore on Tuesday. The total outflows for November alone have touched Rs 23,911 crore, adding to October's heavy exodus of Rs 1.14 lakh crore as investors pivot towards Chinese markets following fresh stimulus measures.
   
4. Disappointing Q2 Earnings: Earnings downgrades from several Indian companies have weighed on investor sentiment. According to Jefferies' report, FY25 earnings projections were revised downward for sixty-three per cent of the 121 companies they monitor, citing slower-than-expected earnings growth and weak economic indicators.

Experts weigh in: Mixed signals but cautious optimism

Dr. V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services, noted, "During a correction phase like the current one, there will be counter moves facilitating a temporary bounce back. This could be driven by the significant liquidity available to domestic institutional investors (DIIs). However, sustaining such a bounce is challenging given the fundamental headwinds, including a strong dollar and high U.S. bond yields."

Akshay Chinchalkar, Head of Research at Axis Securities, remarked on the technical outlook, highlighting the importance of the Nifty's drop to its 200-day moving average at 23,500. He noted, "The area defined by yesterday’s lows is crucial due to a falling channel from early October offering support. Until the index clears the previous day’s high, bears are likely to dominate, with the next downside target at the 23,200 - 23,300 zone."

Investment strategy: Focus on quality amid volatility

With ongoing uncertainties, experts advise a cautious approach. Vijayakumar suggested sticking to quality stocks in sectors like banking, IT, pharma, and new-age digital companies, which have stronger demand outlooks. He warned against sectors like cement, metals, and petroleum refining, which are currently experiencing growth slowdowns.

The market's trajectory remains uncertain as investors await signs of a rebound in earnings growth and stronger GDP data. Until then, staying with fundamentally strong stocks and monitoring global cues closely could be prudent.