It is a sudden fall in the markets, The Nifty has breached 25,000 mark pulled over 1% lower by auto, capital goods, FMCG and metals. The Tata Group stocks, Tata Motors and Tata Steel are among the top losers, down over 2% each.
The Sensex has plunged over 900 pointsThe cut is even deeper across broader markets with both the BSE Midcap and the BSE Smallcap Indices down over 1% each.
According to Siddharth Bhamre, Head of Research at Asit C Mehta Investment Intermediates, “The sudden fall in afternoon trade can be attributed to profitbooking and expiry day volatility. That apart the rising tension between Iran-US and the subsequent rise in crude prices is no doubt impacting investor sentiment as well. That’s also led to some selling pressure across sectors.”
Three reasons why markets are falling today?
There are several factors impacting the market at this hour. Primarily the rising geo-political uncertainties, crude prices moving higher and sharp selling in small and midcap stocks is exerting pressure on the indices-
1. Rising tension between US-Iran
The rising tension between Iran-US is impacting investor sentiment across markets including India.Market veteran Ambareesh Baliga highlighted that, “Geopolitical tension is impacting sentiment in the market.The selling in afternoon trade is primarily on the back of the rising geo-political uncertainties and its impact on investor sentiment as a result.”
According to US President Donald Trump, US personnel were being moved out of the Middle East because “it could be a dangerous place,” adding that the United States would not allow Iran to have a nuclear weapon.
Reuters reported earlier that the US. is preparing a partial evacuation of its Iraqi embassy and will allow military dependents to leave locations around the Middle East due to heightened security risks in the region.
Iran however, maintains that it will not abandon its right to uranium enrichment because of mounting friction in the region. According to a senior Iranian official’s views to Reuters a “friendly” regional country had alerted Tehran over a potential military strike by Israel. The official said, as per Reuters, the tensions were intended to “influence Tehran to change its position about its nuclear rights” during talks with the United States on Sunday in Oman.
2. Profitbooking and volatility on weekly expiry day
That apart many market observers believe that the selling pressure has been heightened as a result of the increased volatility on weekly expiry day. Given the volatility, some investors are also looking at booking profit. This is also exerting pressure on the overall market sentiment and adding to the selling seen.
3.Small and midcaps see selling on valuation worries
The cut is definitely deeper across the small and midcaps. This is because there is still significant valuation worry about that segment. According to Sanjeev Prasad of Kotak Institutional Equities, small and midcaps still have a “long way to correct to their fair values.” He added that the low growth coupled with the high valuation could be a double whammy for the stocks.