Sensex, Nifty Fall Over 1%: What’s Dragging Indian Market Down

Sensex, Nifty Falls: Benchmark indices witnessed a sharp drop on Friday as markets remained wary of the upcoming US non-farm payroll data, which could potentially impact the Federal Reserve's upcoming decision on the interest rates. While the street is confident about the rate cut, investors are also worried about the underlying weakness in the nation's economy.

At 01:30 pm, BSE Sensex was trading at 81,359.11 level mark, down by 822 points, whereas NSE Nifty was trading at 24,921.95 level, down by more than 220 points.

All sectors were trading in red on Friday, with SBI, HCL, Larsen and Toubro, ITC and Tata Motors as the major laggards from the Sensex pack.

Nifty Bank was the worst-performing sector, declining by more than 600 points or 1.3 per cent.

While tensions in global markets continue to loom, domestic investors are also facing another worrying trend that is coming from the primary market where the sky seems to be the limit for companies listing on the bourses. With single-day gains going as high as 100 per cent, D-street analysts are worried that IPOs are turning into a pure gamble for investors.

Last month, a Softbank-backed company, Unicommerce, made a listing debut with a whopping 117 per cent gain. Fast forward to now and the SaaS-based company is down by more than 6 per cent from its issue price.

Earlier this week, Sebi (Securities and Exchange Board of India) released a study on how the primary market has become a Roulette for retail investors. With companies witnessing massive oversubscription rates before listing, investors are eyeing the IPO bazaar as more of a short-term luck game.  

The study showed that nearly 54 per cent of the IPO shares allotted to non-anchor investors are sold within a week of listing. While non-institutional investors offloaded around 63.3 per cent of shares, the retail investor segment sold nearly 42.7 per cent.

"A slew of IPOs hitting the primary market over next few weeks could weigh on the secondary market as investors would be looking to infuse funds in some of the big issues," said Prashanth Tapse, senior VP (research), Mehta Equities.

But this isn't the only reason behind the market's slump. Analysts believe the market has taken a breather for now, with every dip being seen as a buying opportunity. Over the past week, the market has remained stuck in a range-bound phase.

"After witnessing a run-up of 4 per cent in the last month, the market has taken a pause and is trading at higher zones with every dip being bought at. We expect this consolidation to continue in the near term on the back of healthy domestic cues despite global volatility and key US Job data lined up, said Siddhartha Khemka, head - research, wealth management, Motilal Oswal Financial Services Ltd.

Is there a buying opportunity in the dip?

While every bear market comes with its own 'buy-on-dip' opportunity, analysts are still raising the 'caution' banner for investors to focus only on stocks that are 'fairly valued.'

"The Indian economy continues to do well and the macros are improving as indicated by the 47 per cent growth in FDI in Q1 FY25. There is financial stability and the growth momentum in the economy continues to be strong. The only concern is the elevated valuations and, therefore, investors should prioritise buying fairly valued quality stocks on declines," said V K Vijayakumar, chief investment strategist, Geojit Financial Services.

Investors are also seemingly cautious ahead of the September 9, 2024 deadline mandated by SEBI for additional disclosures for certain FPIs, said Manish Chowdhury, head of research, StoxBox.

"Any decisive close below the 24,800 mark on the Nifty index could potentially change the texture of the market to “sell on rise” from “buy on dips” in the short term," he added.