Sensex, Nifty tumble over 1% each; top factors behind today's market fall

Stock market today: The bears were in full control of Dalal Street on Wednesday, September 20. The benchmark indices looked like a sea of red, as most scrips traded in negative territory. The S&P BSE Sensex and the NSE Nifty slipped over a per cent during the session. At close, the BSE Sensex was down 796 points, or 1.18 per cent at 66,800.84, and the NSE Nifty was down 231.9 points, or 1.15 per cent, at 19,901.4 levels.

Let's take a look at the key factors that dragged the indices lower today:

Index heavyweights slump

Bluechips such as HDFC Bank and Reliance Industries were the biggest drags. HDFC Bank tumbled 4 per cent after it said that its net interest margin (NIM) may remain under pressure for some time due to a reverse merger with its parent HDFC Ltd. Besides, HDFC Bank sees its asset quality worsening marginally post-merger. Most brokerages have reduced the target prices on stock post-Analyst Meet, and Nomura went a step ahead as it double-downgraded the stock to neutral.

Reliance Industries shares were also down over 2 per cent after multiple block deals worth 1.75 crore were recorded.

"Both Nifty and Sensex experienced profit booking, largely attributed to a sharp sell-off in HDFC Bank following its analyst meeting. During the meeting, concerns were raised about potential margin pressure and the asset quality post-merger of HDFC twins," said Parth Nyati, Founder at Tradingo. 

Jitters ahead of US Fed policy decision 

Investor sentiment also took a hit on concerns that the Federal Reserve may adopt a hawkish stance in its policy decision, due to be released today. The US Fed is widely expected to keep interest rates on hold for now, but it is also flagging in new economic projections whether they feel rates still need to rise further before the end of the year.

Spike in oil prices

Crude oil prices have been on the rise over the past few days on supply deficit concerns. On Tuesday, the US West Texas Intermediate crude futures rose 90 cents, or 1 per cent, to $92.38, just under a 10-month high reached on Monday, while global oil benchmark Brent crude futures rose 27 cents, or 0.3 per cent, to $94.70 a barrel. Prices have risen for three consecutive weeks, according to a Reuters report. However, prices fell by more than $1 on Wednesday ahead of the U.S. Federal Reserve's interest rate decision, with investors uncertain when peak rates will be hit and how much of an impact it will have on energy demand.

"Factors such as increasing US bond yields, rupee weakness, a surge in crude oil prices, and selling by foreign institutional investors (FIIs) further contributed to the challenges faced by our markets," said Nyati.

Global markets  

Asian shares declined Wednesday as markets awaited a decision on interest rates by the Federal Reserve.

On Wall Street, the S&P 500 slipped 0.2 per cent to 4,443.95. The Dow Jones Industrial Average dropped 0.3 per cent to 34,517.73, and the Nasdaq composite lost 0.2 per cent to 13,678.19.

Markets have seesawed for weeks on uncertainty about whether the Fed is done with its market-shaking hikes to interest rates. By raising its main interest rate to the highest level in more than two decades, the Fed has helped inflation cool from its peak last year, but at the cost of hurting investment prices and damaging some corners of the economy.

Technical view

According to Nyati, from a technical perspective, Nifty and Sensex have identifiable immediate support levels at 19,900 and 66,900, respectively. If these levels are breached, we may witness additional profit booking, potentially leading to 19,640 for Nifty and 66,000 for Sensex.

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