Despite resistance from traders and brokers, SEBI plans to limit the expiry date of options contracts to once a week per exchange and nearly triple the minimum trading volume, in line with its proposal in July, according to reports.
SEBI plans to increase the minimum transaction size from Rs 50 lakh to Rs 1.5-2 million, as proposed in a consultation paper in July. Learn more
This comes after New York-based brokerage Goldman Sachs reportedly downgraded SBI to ‘sell’ from ‘neutral’. Goldman Sachs also cut its target price for SBI to 742 rupees from 841 rupees.
Related article: Goldman Sachs downgrades SBI to “sell” and sharply lowers target price, shares fall
Goldman Sachs also maintained its ‘sell’ rating on Vodafone Idea shares with a target price of Rs 2.5 (previously Rs 2.2), sending the stock down 14 per cent to Rs 12.91 per share in intraday trade on Friday. Learn more
On the sectoral front, Nifty Corporation Bank was the biggest loser, falling 3.57 per cent, while Canara Bank, Bank of Baroda, Indian Overseas Bank and PNB Bank fell between 2-3 per cent.
Other sectors like Nifty Oil & Gas, Metals, Media and Consumer Durables also fell in the range of 1-2 per cent intraday.
Broader markets also showed weakness with the BSE Small Cap index declining 0.74 per cent after hitting an intraday record high of 56,959, while the BSE Mid Cap index declined 1.23 per cent intraday.
Why the market is falling
Analysts said investors resorted to profit booking today after the Sensex and Nifty rallied in the last two weeks and hit record highs on Monday.
“We had expected significant profit-taking in small and mid-cap stocks over the past few months, but that did not happen. Many companies are still trading at premium valuations despite the lack of earnings growth,” said G. Chokkalingam, founder and head of research at Equinomics Research.
Chokkalingam further said high valuations and liquidity issues have led to volatility in the small and mid-cap sector, but blue chip stocks on the Nifty and Sensex have shown resilience.
“Small-cap indexes have historically corrected every three-four years when valuations soar. This trend is now in its fifth year. Even if there is a recovery, profit-taking is likely to continue due to high valuations and drying up of liquidity from the secondary market,” Chokkalingam added.VK Vijayakumar, chief investment strategist at Geojit Financial Services, also advised investors to tread cautiously amid high valuations and prioritize buying blue-chip stocks at fair valuations when stock prices are declining.
Slowness of competitors around the world
Today’s decline in the Indian stock market comes amid similar weakness in global stock markets. In the US, all three major indexes fell overnight as investors turned cautious towards risk assets amid growing concerns about the outlook for the US economy.
The S&P 500 fell 0.3%, while the Dow Jones Industrial Average lost 0.54%. The Nasdaq Composite Index rose 1.2% at one point but ended up up just 0.25%. Meanwhile in Asia, Japan’s Nikkei Stock Average fell 0.78% and South Korea’s KOSPI dropped 1.14%, while Australia’s ASX/200 rose 0.38%.
According to analysts across the globe, the short-term movement of the market will depend on the US employment report due to be released tonight. The US non-farm payroll data due to be released today will give further clues on the amount of interest rate cut by the Federal Reserve.
“There is a consensus that the Fed will cut rates at its September meeting, but the magnitude of the cut will depend on the employment data. If the August employment report is worse than market expectations and the unemployment rate is higher than market expectations, the Fed can cut rates by 50 basis points. However, this may not be received well by the market, which may react negatively as it prices in serious growth concerns and even a hard landing scenario for the US economy may weigh on the market. Investors can wait for this important data and take their call based on it,” Vijayakumar said.
However, from India’s perspective, Vijayakumar said the economy continues to perform well and macroeconomics are improving, as shown by the 47 percent increase in FDI in the first quarter of FY25 and the steady decline in Brent crude oil prices, which are now below $73.
First Edition: September 6, 2024 | 11:25 AM teeth
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