The bloodbath in the Indian market on Thursday is led by multiple factors including the mute second-quarter results from the majority of the heavyweights and midcap companies as well as the monthly derivatives contracts expiry (F&O) and Nifty Bank has slipped over 1300 points being the key driver the Nifty50 on the back of its weightage in the benchmark index.

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The BSE Sensex has fallen over 1100 points today while Nifty50 below17900-mark for the first time since October 12, 2021. Similarly, the broader markets such as mid and small-cap each down around 2 per cent today at the market close.

Mute Q2

The earnings session has just come half-way with the majority of the companies have started coming out with their quarterly numbers, as many of them, so far have reported results below D-street’s expectations. The Q2 results season generally begins from October 15 to November 15, 2021.

For that instance, the heavyweights such as Adani Ports, ITC, Bajaj Finance, Axis Bank, have reported their results this week many of which were below expectations, and profit booking was witnessed.

Profit Booking

The market since the last couple of weeks was, except this week was trading at an all-time level high as alone in this month has surged over 200 points while Nifty crossed 18000-mark for the first time.

Since the last one week, the foreign institutional investors have been on a selling spree, similarly, the domestic investors too are taking the advantage of life high market till last week.

Monthly F&O expiry

The derivatives segment has been entering into November series with October series ending today, amid expiry on Thursday. Derivative segment expires on every last Thursday of the month. On the expiry day, the contracts are settled (or simply get expired in case of Options). So, the settlement value of each contract is tied to the closing price of the stock on the last day of expiry.

Futures and Options contracts derive their value from their underlying stocks or indices — cash market, and its eventually impacts the derivatives contract if the cash market is weak.

Nifty Bank sell-off

Nifty Bank for the first time since October 20, 2021 has been trading below 40000-mark. The Index fell over 1000 points alone today and slumped over 2000 points in the last three days after hitting a new high of over 41800-level. 

Nifty Bank carries maximum weightage in Nifty50 Index, with HDFC Bank, ICICI Bank and Axis Bank contributing most to the benchmark index. Hence, weakness in banking stock will eventually aid the decline in the Nifty50. HDFC Bank down over 2 per cent and ICIC bank down 3.5 per cent intraday.

Global Cues

The US markets on Wednesday closed mixed with Dow Jones closing lower by over 250 points while Nasdaq closed with gains for 3rd day running. Similarly, Asian markets opened mixed with the Japanese 'Nikkei' trading lower by 200 points in early trade earlier today. 

While the foreign institutional investors have been on selling spree for over a week now, on Thursday FIIs sold around Rs 2000 crore in cash market as well as sold Rs 2552 crore in Index Futures and around Rs 1600 crore in Stock Futures.