Nifty Nears Correction as Sensex Drops 1,300 Points Amid Broad Selloff

On December 20, the Nifty approached a technical correction, nearing a 10% decline from its peak, while the Sensex shed close to 1,300 points from its intraday high due to widespread sectoral downturns that heightened market anxiety. Nifty IT emerged as the weakest sector, declining over 2% despite Accenture's stronger-than-expected Q1 earnings report.

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By around 3 PM IST, the Sensex had dropped 1,160 points or 1.5% to 78,047, while the Nifty plunged 371 points or 1.49% to 23,575. Market breadth was overwhelmingly negative, with 1,022 stocks gaining, 2,934 declining, and 107 remaining unchanged.

Ajit Mishra, Senior Vice President at Religare Broking, attributed the day’s selloff to intensified FII (Foreign Institutional Investor) activity, coupled with concerns over the US Federal Reserve’s cautious stance on interest rate cuts in 2025. “Markets were pricing in three rate cuts for the next fiscal, but even two now seem uncertain,” Mishra noted.

Foreign investors offloaded shares worth ₹8,000 crore over three sessions, reviving worries about potential large-scale selling akin to October’s trends. Net FII sales for the year so far have reached ₹2.94 lakh crore.

The Nifty IT index dropped 2.6%, reversing early gains of nearly 1% as profit-taking prevailed. Heavyweights such as TCS, Infosys, Wipro, and Coforge dragged the index lower, despite overnight ADR gains of 2-3% in Infosys and Wipro, buoyed by Accenture’s optimistic guidance. Other key indices, including Nifty Bank, PSU Bank, Auto, and Realty, recorded declines of up to 2%. Losses in HDFC Bank, ICICI Bank, SBI, and Axis Bank contributed significantly to the Nifty Bank’s downturn.

Earlier gains in Nifty Energy, Pharma, and Metal, which climbed nearly 1% each, evaporated by afternoon as intensified selling led to declines of almost 2% in these sectors.

The mid-cap and small-cap indices followed suit, with losses of 2.9 and 2.2%, respectively. Mishra emphasized the importance of adopting a selective, bottom-up investment strategy, focusing on stocks offering reasonable valuations and revenue growth potential.

Among individual performers, Siemens shares plunged nearly 9%, reflecting investor concerns over the private capex outlook and supply chain issues in digital industries. Analysts expressed disappointment with the company’s investor call, which highlighted the sluggish pace of private capex growth.

RBL Bank extended its losing streak to seven sessions, tumbling 7% after Morgan Stanley Research cut its price target and earnings projections. The firm revised its estimates for RBL Bank’s earnings down by 1% for FY25, 9% for FY26, and 2% for FY27.

Mazagon Dock Shipbuilders fell 5%, marking its third consecutive day of losses after a 36% recovery from November lows. The company recently announced December 27, 2024, as the record date for its stock split, which will convert one ₹10 share into two ₹5 shares.

Despite extending its losing streak to a fourth session, the Nifty found support near 23,870, a key level coinciding with the 61.8% Fibonacci retracement of its November-December rally and the 200-day moving average. Akshay Chinchalkar, Head of Research at Axis Securities, noted that the three-day RSI fell below 10, historically signaling either a pause in the downtrend or a potential short-term recovery.

Top losers on the Nifty included Tech Mahindra, IndusInd Bank, Trent, Axis Bank, and M&M, while marginal gains were seen in Dr. Reddy's Labs, Nestle India, and ICICI Bank.