Key Factors that Dragged the Market Today

The stock market fell like a deck of cards today, as the ripples of the regulatory crackdown by the Chinese government was felt by markets across the globe.

Investors worried whether the selloff in Chinese tech stocks would spread to other segments.

In across the board selling by the investors, the benchmark indices tumbled for a third day while volatility shot up ahead of the US Federal Reserve outcome later today and Thursday's July futures and options (F&O) expiry.

Overall, the BSE barometer Sensex gave up the 52,000 mark as it cracked 776 points to day's low of 51,803.

NSE's Nifty 50 tumbled over 200 points to 15,513.

In US stock markets, Wall Street indices fell, ending a five-day winning streak as investors were cautious before results from top tech and internet names and the Federal Reserve announcement.

The Dow Jones Industrial Average fell 0.2% while the Nasdaq dropped 1.2%.

Also, renewed concern over the pandemic with the rapid spread of the delta variant took a toll.

Let's have a look at the top factors behind the market sell-off.

Why did the markets fall today?

Global mood sours

Asian stocks extended declines as a rout in China and a mixed response to major US technology earnings spurred caution across the globe, including in India.

Equities in China and Hong Kong fell further, exacerbating this week's plunge on a regulatory crackdown by Beijing that's stirred questions about how far officials will go to curb big companies.

Japan's Nikkei fell 1.4% in today's session.

Hong Kong's Hang Seng Index shed 0.7% in early trade today and China's Shanghai Composite fell 0.7%.

Meanwhile, the embattled Hang Seng Tech Index was last flat, a day after touching its lowest level since the index's creation in July 2020. It's still down about 40% from its February high.

Meanwhile, US stock index futures fell during early morning trading today after the major averages pulled back from record highs, snapping a five-day winning streak.

At the time of writing, US stock futures are trading on a flat note today with the Dow Futures trading down by 32 points.

IMF growth downgrade

The sentiment on street also took a beating after the International Monetary Fund (IMF) on Tuesday forecasted India's economy to grow 9.5% in 2021-22 - a cut of 3% points from its earlier forecast - citing a lack of access to vaccines and renewed waves of Covid-19 cases.

On the other hand, IMF maintained its 6% global growth forecast for 2021, upgrading its outlook for the United States and other wealthy economies but cutting estimates for developing countries struggling with surging Covid-19 infections.

US dollar

In currency markets, the US dollar sat below recent highs after a month-long rally.

The safe-haven yen gained and the risk-sensitive Australian and New Zealand dollars dropped back.

Analysts at Commonwealth Bank of Australia (CBA) attributed the moves to falling risk sentiment on the back of the Chinese regulatory crackdown.

Caution ahead of Federal Reserve meet

Market participants were wary of placing large bets prior to the key events in the markets such as central bank policy action.

On the global front, street will be watching closely for any hints on when the Fed will start reducing its purchases of government bonds and any fresh insight into its views on inflation and economic growth when it announces its outcome later in the evening.

Back home, the F&O expiry on Thursday and the Reserve Bank of India (RBI) policy next week is also luring investors to stay on the sidelines - at least for now.

FIIs on selling spree

The foreign institutional investors (FIIs) have once again turned sellers on street after hefty buying witnessed in last two months.

So far this month, FIIs have offloaded Rs 80 bn from Indian equities as markets trade at all-time high levels and valuations remain a concern.

According to an analyst, foreign portfolio investment (FPIs) have been on the sell-mode in July. Heavy FII selling is seen in the Nifty 15,750- 15,900 range.

The weakness in FPI favourites like HDFC twins may be due to FPI selling and portfolio churning.

Equitymaster's technical view on the markets.

We reached out to Brijesh Bhatia, Research Analyst at Equitymaster, and Editor of the premium monthly recommendation service Fast Profits Report, for his technical view on the markets.

Here's what he has to say...

• The bears winning the game as bulls fail to surpass 16,000 levels for five times taking back to 15,600 zone.
  
  The range of 15,400-16,000 prolongs on Nifty even after global equity indices witnessed selling pressure in last couple of trading sessions.The euphoria in midcap and small cap stocks will outlive and dips will attract investors from short to medium term.

 

Brijesh regularly posts updates regarding the markets on Equitymaster's Telegram channel.

Brijesh has been bullish on the market for a long time and he enjoys sharing his knowledge on making fast profits.

You can take advantage of his trading knowledge by joining his Telegram channel - Fast Profits.

Top gainers and losers today

Among the individual stocks, Adani Enterprises, Adani Transmission, Adani Total Gas and Adani Green Energy were in focus today after National Services and Depository (NSDL) rectified the status of Adani group linked FPIs.

Bharti Airtel shares moved higher by 5% to Rs 570.5 on the BSE today after the country's premier communications solutions provider upgraded its prepaid plans and discontinued its Rs 49 entry level prepaid recharge. The revised plans will be effective from Thursday 29 July.

Big companies like Tata Steel, IndusInd Bank, and Bajaj Finserv were also among the top performing stocks today.

Shares of Interglobe Aviation (Indigo) were under pressure today after the company reported larger-than-expected net loss of Rs 31.7 bn.

Other top stocks including M&M Financial Services, Kotak Mahindra Bank, Cipla, Tata Motors fell in the range of 2-4%.

Sell-off continued in banking and financial services stocks along with pharma that pushed benchmark indices lower today.

To know what's moving the Indian stock markets today, check out the most recent share market updates here.

Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such. Learn more about our recommendation services here...