Why the Nifty dropped to 3-week low after hitting fresh highs
₹2,391.98 crore on Friday, while domestic institutional investors, or DIIs, net purchased ₹690.52 crore, helping the market recover to an extent. Both the Nifty and the Sensex fell 2% from their day highs.
The Nifty50 index settled lower by 0.8%, or 172.35 points, closing Friday’s trading at 22,475.85 points, while the S&P BSE Sensex ended 1% lower, down by 732.96 points, at 73,878.15 points. All said, there were also some winners in Friday’s market, with Coal India Ltd’s stock leading the Nifty50 pack with a gain of about 5%.
Investors are not just turning cautious about valuations becoming pricey but have a deluge of other reasons as well to be wary of—the outcome of the ongoing general election, geopolitical tensions, soaring crude oil prices, mounting inflation, and delayed rate cuts in the US. Friday’s sell-off, though, was mainly driven by a fall in the shares of Reliance Industries Ltd, HDFC Bank Ltd, and Larsen & Toubro Ltd.
“It is not surprising to see some profit-taking near the all-time high level," said Gaurav Dua, senior vice-president and head, capital market strategy, Sharekhan by BNP Paribas. "But if we look at the bigger picture rather than one-day movement, the markets seem to have slipped in a consolidation zone in the past couple of months." The Nifty benchmark has stayed in a narrow range of 1,000 points—21,800 to 22,800, he pointed out.
That said, Dua added that markets tend to play out a couple of minor corrections ranging from 5-10% every year, but such declines are an opportunity to buy quality stocks at more reasonable prices. Jasani of HDFC Securities said that while minor corrections ahead of the election results can be expected, any large correction would be a result of major disappointments
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