Sensex, Nifty drop: Key factors behind the fall

India’s key stock market indices declined on November 18, tracking weak global cues.

The Nifty 50 dropped to 17,746, losing over 150 points (0.81 percent), while the benchmark 30-pack Sensex fell over 500 points.

The market is in negative territory for the third consecutive day and experts link this to weak global cues and continuous withdrawal by foreign portfolio investors.

The tepid listing of the much-hyped shares of One 97 Communications, the operator of Paytm, added to the negative sentiment. The stocks listed at Rs 1,950 on the National Stock Exchange compared to its offer price of Rs 2,150, and plummeted to as low as Rs 1,586.35.

Here are the main factors that dragged the markets lower:

1. Weak global cues – US shares pulled back overnight after the release of home building data, which witnessed a drop, and a construction backlog increased amid higher material prices and labour shortages. That, along with higher inflation in the Eurozone, dragged Asian peers down. Japan’s Nikkei 225 was trading 90 points lower at 11.44 am IST while the Hang Seng tumbled 345 points.


2. Fed Policy - The ever-lingering risk of earlier-than-expected tapering by the US Federal Reserve along with interest rate increases is continuously playing on the minds of investors. In the Asian markets, investors turned to safe havens such as government bonds, gold and the yen.


3. Auto, metals and the IT sectors were a major drag: Although all sectors on the BSE and the NSE were down, the Nifty Auto index fell more than 3 percent, BSE Metals dropped more than 2 percent and the Nifty IT lost 1.6 percent.

The top losers were Tata Motors (-4.41 percent), Mahindra & Mahindra (-3.32 percent), Eicher Motors (-3.06 percent), HCL Technologies (-2.67 percent), Tech Mahindra (-1.99 percent) and Tata Steel (-2.13 percent).

Technical View

The Indian benchmarks started flat amid weak global cues coupled with rising inflation concerns. However, some support may come in on comments by finance minister Nirmala Sitharaman that there are clear signs of growth in the economy.

“Our research suggests that the levels of 17,700-17,900 may act as a support level in the market. If the market sustains above the support of 17,700-17900, we can expect it to trade in the range of 17,700-18,000,” said Likhita Chepa, a senior research analyst at Capitalvia Global Research.