Sensex slumps over 1,600 points: Weak global cues, HDFC Bank Q3 result top factors behind the steep fall

Stock market news, stock market today: Domestic equities, on expected lines, witnessed a heavy bout of sell-off in trade on Wednesday, January 17, amid weak global cues. Further, HDFC Bank's Q3 results back home, too, weighed on investor sentiment.

At the close, Nifty ended at 21,571.95, down 460.35 points, or 2.09 per cent, after marking the day's low of 21,550.45. Sensex, on the other hand, ended at 71,500.65, down 2.23 per cent or 1628.01 points. At the day's lowest level, the BSE Sensex hit 71,429.3 levels. BankNifty was the major laggard followed by Metal index.

"Given the elevated valuations, coupled with the fact that optimism regarding earnings and GDP growth for FY24 is already reflected in the market, triggered the correction.," Vinod Nair, Head of Research, Geojit Financial Services, said.

Here are the likely triggers that led to the descent of headline indices by a wide margin.

Weak China Q4 GDP nos

China's GDP figures weighed on markets as the country's fourth-quarter GDP came in lower than expected, at 5.2 per cent. This impacted other Asian markets.

Rate cut expectations remain uncertain

After certain Fed officials lessened the importance of interest rate cuts, the expectations around early interest rate cuts by the US Federal Reserve became uncertain. Fed Governor Christopher Waller advocated proceeding with caution to avoid more tightening. Thus, traders discounted the lower chances of a rate cut in March this year.

“So, from now on, the setting of policy needs to proceed with more caution to avoid over-tightening," he said.

Mixed global markets

After the weak US overnight trade, most Asian markets also saw a pullback on Federal Governor comments. Nonetheless, Japanese markets notched a new 34-year high in anticipation that the policy would remain ultra-loose.

Red Sea crisis

The Red Sea crisis has impacted shipping and other allied businesses alike. The U.S. military carried out new strikes in Yemen on Tuesday against anti-ship ballistic missiles in a Houthi-controlled part of the country as a missile struck a Greek-owned vessel in the Red Sea, as per the Reuters report. The increasing geopolitical sentiment is rekindling risk-aversion sentiment.

Heavyweights drag

Heavyweights, including the likes of HDFC Bank and Wipro, saw a substantial drag of up to 5 per cent. At the time of writing this copy, HDFC Bank shares were down by 5.86 per cent at Rs 1,582.15 per share.

Major reasons behind a steep decline in HDFC Bank shares are concerns over deposit and loan growth ahead, uncertainty over the net interest margin (NIM), a cut in guidance for the opening of new branches, and an increase in provisions.

Bond yields rose

As rate-cut chances by the US Fed in March have largely been waning, the US 10-year yield has jumped to 4.04 per cent. This rise in bond yield is impacting FII flow into emerging markets, hence the impact.

Technical factors

"Slippage past 22,013 has taken away the near-term upside momentum, exposing 21835/790. While we hope this region to hold initially, the inability to reclaim 22,058 on the bounce or direct slippage past 21,760 could bring in 21,200 as the likely downside objective," noted Anand James, Chief Market Strategist, Geojit Financial Services. 

By confirming the negative divergence, the index has made a bearish candle on the daily chart with a probability of forming an advanced harmonic bullish cypher pattern at 21,220, noted Aditya Gaggar, Director, Progressive Shares.