Market tumbles over 2% as volatility spikes amid global tensions

The Indian stock markets witnessed a sharp decline on Thursday, October 3, 2024, as global uncertainties and heightened volatility led to a significant sell-off. The BSE Sensex plummeted 1,769.19 points or 2.10 per cent to close at 82,497.10, while the Nifty 50 tumbled 546.80 points or 2.12 per cent to end at 25,250.10.

The market opened with a gap-down and faced sustained selling pressure throughout the session, marking the fourth consecutive day of decline for the Nifty index. Hardik Matalia, Derivative Analyst at Choice Broking, noted, “On the daily chart, the Nifty index faced selling pressure for the fourth consecutive day, closing near the 25,250 mark. A bearish candle has formed, signaling continued weakness.”

The sectoral performance was overwhelmingly negative, with Realty, Auto, Energy, and Financials emerging as major laggards, declining between 2.43 per cent and 4.36 per cent. The broader market also felt the heat, as evidenced by the Nifty Midcap 100 index dropping 2.21 per cent and the Nifty Small Cap 100 index falling 1.96 per cent.

Among individual stocks, BPCL led the losers on the National Stock Exchange (NSE), plunging 5%, followed by Shriram Finance (-4.42%), Larsen & Toubro (-4.05%), Axis Bank (-3.97%), and Reliance Industries (-3.95%). On the flip side, JSW Steel emerged as the top gainer with a modest rise of 1.33%, while ONGC inched up by 0.36%.

In the Sensex pack, Larsen & Toubro witnessed the steepest fall, dropping 4.18% to ₹3,498.80. Axis Bank slipped 4.12% to ₹1,175.45, Tata Motors declined 4.08% to ₹926.00, and Reliance Industries dropped 3.91% to ₹2,815.25. Maruti Suzuki also saw a significant decline, falling 3.90% to ₹12,653.45. JSW Steel emerged as the top gainer among Sensex stocks, rising by 1.18% to ₹1,039.80.

The market breadth was heavily skewed towards decliners, with 2,881 stocks falling against 1,107 advances on the BSE. Despite the overall negative sentiment, 237 stocks managed to hit their 52-week highs, while 67 touched their 52-week lows.

A significant development was the spike in market volatility, as reflected by the India VIX, which surged 9.86% to 13.1700. Matalia explained, “This spike suggests traders expect larger price swings in the near term, contributing to cautious sentiment and potential short-term pressure on the broader market.”

Analysing the technical outlook, Matalia added, “The current trend indicates a ‘sell on rise’ strategy, with fresh buying suggested only if the index moves above the 26,000 zone. Immediate support is seen at 25,000, followed by 24,750, while 25,500 is expected to act as the immediate resistance.”

Open Interest (OI) data provided further insights into market expectations. The highest OI on the call side was observed at the 25,500 and 25,600 strike prices, while on the put side, it was concentrated at the 25,200 and 25,000 strike prices. This distribution suggests that traders are positioning for potential moves around these key levels.

Ajit Mishra, SVP of Research at Religare Broking Ltd, commented on the market movement, saying, “Geopolitical uncertainty and concerns over a potential decline in foreign inflows have spooked the markets. With Nifty breaching multiple supports — such as the 20-day exponential moving average (DEMA) around the 25,580 level and trendline support near 25,350 — the market could face further downside.”

Mishra advised, “We are now looking at the 25,000-25,150 zone as the next support, while any rebound is likely to be capped in the 25,450-25,600 range. Traders should adjust their positions accordingly, using any recovery to reduce longs and initiate shorts in weaker pockets.”

Shrikant Chouhan, Head of Equity Research at Kotak Securities, provided additional technical insights, stating, “As long as the market is trading below 25365/82800, the weak sentiment is likely to continue. On the down side, it could slip till 25150-25025/82200-82000 or the 50-day SMA. On the other side, one quick technical pullback is likely if the market succeeds to trade above 25365/82800.”

As global uncertainties continue to weigh on investor sentiment, market participants are advised to remain cautious and vigilant. The interplay of technical levels, volatility, and global factors will likely guide market direction in the coming sessions, with traders closely monitoring key support and resistance levels for potential trading opportunities.