Indian Equities Decline Amidst Volatility and Weekly Expiry

Indian equity markets experienced a downturn on Tuesday, concluding the trading session with losses amidst significant volatility, particularly as traders managed positions ahead of the weekly expiry. The session saw an initial positive start, but selling pressure intensified in the afternoon, dragging major indices into negative territory. Sectors such as Information Technology, Metals, Banking, and Fast-Moving Consumer Goods (FMCG) faced selling pressure.

The broader market also reflected this weakness, with the Nifty Midcap 100 and Nifty SmallCap 100 indices declining. All sectoral indices closed in the red, except for Nifty Consumer Durables, which saw a marginal gain. The Nifty Metal index was the worst performer, dropping 1.44%, followed by Information Technology and Auto sectors, both down 0.86%.

Experts pointed to several factors dampening investor sentiment. Ajit Mishra from Religare Broking Ltd. noted profit-taking in heavyweight sectors, subdued risk appetite due to weak global cues, and inconsistent Foreign Institutional Investor (FII) flows. Technically, a sustained drop below the 20-day Exponential Moving Average (EMA) could lead to a further correction towards 25,400.

Vinod Nair from Geojit Financial Services highlighted that FIIs continued their selling streak for the fourth consecutive session, influenced by rising U.S. bond yields and diminishing expectations of a near-term Federal Reserve rate cut, which curtails risk appetite. However, he added that India's macro fundamentals, supported by strong manufacturing Purchasing Managers' Index (PMI) and resilient Goods and Services Tax (GST) collections, remain robust and could sustain earnings momentum.

Shrikant Chouhan from Kotak Securities suggested that sentiment would likely remain weak as long as the Nifty and Sensex trade below their respective resistance levels of 25,700 and 83,750. Further declines could push the market towards 25,400/82,800, while a close above 25,700 might signal a rebound.

Impact: This news indicates a negative sentiment and potential short-term downside for Indian equities, influenced by global financial conditions and foreign investor behaviour. The robust domestic macro picture offers some underlying support. Rating: 6/10

Difficult Terms and Meanings: FIIs (Foreign Institutional Investors): These are overseas entities that invest in a country's financial assets, such as stocks and bonds. Their buying or selling can significantly impact market movements. EMA (Exponential Moving Average): A type of moving average that places a greater weight and significance on the most recent data points. It is used in technical analysis to identify trends and potential support/resistance levels. PMI (Purchasing Managers' Index): An economic indicator that provides information about business conditions in the manufacturing and services sectors. A PMI above 50 indicates expansion, while a PMI below 50 indicates contraction. GST (Goods and Services Tax) collections: The total revenue collected by the government from the Goods and Services Tax, which is a consumption tax levied on the supply of goods and services. Strong GST collections indicate robust economic activity. Fed rate cut: A reduction in the benchmark interest rate set by the U.S. Federal Reserve (the central bank of the United States). Expectations of rate cuts can influence global investment flows and risk appetite.