Sensex and Nifty Close in Red Amid Global Cues and Profit-Taking Ahead of Union Budget 2024

The Indian stock market saw a significant drop on Friday with Sensex down 738.81 points and Nifty declining 275.25 points. This broad sell-off comes despite a positive trend over the past seven weeks. Market participants are now looking forward to the Union Budget 2024 for further cues.

On Friday, the Indian stock market closed on a negative note, with the Sensex plunging 738.81 points to settle at 80,604.65 and the Nifty falling 275.25 points to close at 24,530.90. Among Nifty companies, only four saw advances, while 46 registered declines, marking a broad-based sell-off.

Despite the negative close, the market has shown resilience over the past seven weeks, with both the Sensex and Nifty posting cumulative gains. This trend underscores a steady bullish sentiment even amidst short-term corrections.

Infosys, ITC, Asian Paints, and Britannia emerged as top gainers in the Nifty index. Infosys shares closed 1.8% higher at Rs 1789, having touched an intra-day high of Rs 1844. The potential rerating of the IT sector, driven by positive forecasts from industry leaders like Infosys and TCS, could boost market sentiment further.

Conversely, Tata Steel, JSW Steel, BPCL, Hindalco, and ONGC were among the top losers, contributing to the market's decline. Ajay Bagga, market and banking expert, noted that negative global cues and profit-taking ahead of the upcoming Union Budget 2024 triggered the sell-off. He described this phase as a normal consolidation around all-time high levels, advising investors to wait for the Union Budget details before taking fresh positions.

Global signals over the last two days have been predominantly negative, resulting in similar responses from Indian markets. While major exchanges like the BSE and NSE remained unaffected by global technical issues linked to Microsoft Azure, several trading platforms faced disruptions, adding to the day's volatility.

Shrikant Chouhan, Head of Equity Research at Kotak Securities, pointed to the Union Budget as a key event for market participants. He also highlighted that stock-specific action is expected to continue over the next few weeks in light of the Q1FY25 result season.

Analysts anticipate continued cautious trading until Tuesday when the Union Budget is unveiled. Additionally, there is sector rotation in anticipation of an imminent Fed rate cut in the September FOMC meeting, with high-growth, momentum stocks being sold and underperforming sectors seeing interest.

The expected Fed rate cuts, though shallow and slow, are not likely to benefit emerging markets immediately. V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services, noted the distinct trend of underperformance in overvalued smaller stocks versus outperformance in large-cap stocks, suggesting a sustainable rally without risk of overheating.

(With inputs from agencies.)