Stock Market Declines as Investors Worry about Valuations; FMCG Stocks Diverge

The BSE Sensex declined by 906.07 points, or 1.23%, to 72,761.89, and the NSE Nifty fell 338 points, or 1.51%, to 21,997.70. Concerns about excessive valuations in mid- and small-cap segments prompted mutual funds to halt lump sum investments in these categories. Market experts emphasized caution, given the volatility in these segments. They also highlighted the potential for further declines. Within the Sensex pack, ITC, ICICI Bank, Kotak Mahindra Bank, Nestle India, Bajaj Finance and HDFC Bank were the only gainers. On the other hand, Power Grid Corporation was the major laggard with a 7.28% erosion in share value.

The number of stocks hitting lower circuit reached 1,087 against 118 stocks that hit upper circuit. Market breadth was negative, with 3,521 stocks declining, 404 advancing, and 60 remaining unchanged. Among the sectoral indices, Nifty realty, metal, and media declined over 6% each. Nifty Smallcap 100 declined 5.28%, while Nifty Midcap 100 was down by 4.40%.

Recently, the small- and mid-caps faced a bumpy ride due to SEBI's vigorous crackdown on over-speculation, prioritizing the safeguarding of market participants' interests. Both indices slipped below their recent consolidation levels, sparking increased bearishness among market participants. Moreover, they've dipped below crucial short-term moving averages, further dimming the overall sentiment. While buying on substantial dips may offer opportunities, it's essential to be highly selective and focus on specific stocks within the broader market landscape.

We are of the view that, the short-term texture of the market turned to bearish from the bullish. Now, for the day traders, 22200/73600 would act as a trend decider level. Below the same, the market could slip till 21900-21800/72500-72200. On the flip side, above 22000/772800 a minor pullback rally possible till 22100-21120/73000-73100.

Adani Green Energy (-9.88%), Adani Total Gas (-9.23%), Adani Enterprises (-7.32%), Adani Ports (-7.12%), Adani Wilmar (-5.07%), Ambuja Cements (-5.06%) were the top losers in the Sensex.

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