Sensex, Nifty fall after new highs. What does it mean for investors – Explained – Times of India

Indian stock markets took a beating on Wednesday with BSE Sensex falling over 800 points and Nifty dipping below the 20,000 mark. Nifty recorded one of its weakest sessions in nearly a month and Sensex is on track for its least favorable day since early August.
HDFC Bank faced the most significant setback within the Nifty 50, plunging by as much as 3.3%. This decline resulted from the bank’s acknowledgment that its recently completed merger with HDFC Ltd would put pressure on critical financial indicators like net interest margin and non-performing assets.
Apurva Seth, head of market perspective and research at Samco Securities told Reuters that HDFC management has tried to give some clarity. “There was a lot of uncertainty with respect to how the numbers of merged entity would be. With the recently concluded analyst meet, the management has tried to give some clarity,” he said. HDFC Bank in turn dragged down the overall banking index as well. According to a Reuters report the banking index is on track for its biggest intraday drop since August with a 0.7% decline.
While the equity benchmark indices, Nifty in particular, were hit by the decline in HDFC Bank and Reliance Industries, broader global cues were unfavorable as well. With the US Federal Reserve’s decision looming, the global markets are watching out for the commentary from the US central bank. While a rate hike is unlikely in today’s meeting, the commentary may indicate a possible rate hike in November, analysts told TOI, which would be a negative for markets.
Oil prices surging to their highest levels in 10 months have also stoked inflation fears. Global benchmark Brent hit over $95 per barrel, a first since November last year.
Where are Indian equity markets headed?
Siddhartha Khemka, Head of Retail Research, Broking and Distribution, MOFSL told TOI that Nifty is under pressure today because of HDFC Bank and Reliance. “While HDFC Bank has spoken of its key financial ratios being affected by the merger, Reliance has been hit by crude prices. Additionally, global cues are not favorable, with all eyes on the US Federal Reserve’s decision and commentary,” Khemka said.
“Overall, while in the coming days we expect some profit booking and caution, Nifty and the Indian markets in general are fundamentally strong, so a gradual uptick is likely,” he added.

Gaurav Dua, Head – Capital Market Strategy at Sharekhan by BNP Paribas says, “Post the smart rally, the markets could take a breather. Nifty could consolidate in a narrow range for 400-500 points around 20,000 level.”
According to Ajay Vora, Head- Equities, Nuvama Asset Management, Nifty has seen an almost 20% rally since the end of March, driven by strong corporate results and FII/DII inflows. “However crude prices moving closer to $100 will resurface inflation concerns. This has led to higher probability of FED raising rates again in their next meeting which is what UST are also indicating. This can definitely cap a near term upside in the market,” Vora told TOI.
PTI quoted VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services as saying that multiple challenges are lined up for the markets in the coming days. “There are too many challenges for the market in the near-term. Brent crude at USD 94, the dollar index above 105, the US bond yield at 5.09 per cent and the INR at record lows against the dollar are strong headwinds,” he was quoted as saying.
What should investors do?
Amidst the stock market volatility, what should investors do? Is there a case to book profits, or should they avoid panic selling and focus on fundamentals?
Sujan Hajra, Chief Economist & Executive Director at Anand Rathi Shares and Stock Brokers points out that most of the major equity indices are giving returns higher than their historical averages. He believes that the rally in Indian equities will continue and investors should remain invested. However, Hajra tells TOI that since equities are inherently volatile in the near run, investors should look at a time horizon of over 12 months, ideally 3 years, when looking at equities assets.
Gaurav Dua of Sharekhan by BNP Paribas tells TOI that the correction is a healthy sign for the markets and investors should use the opportunity to accumulate quality stocks.
Siddhartha Khemka of Motilal Oswal recommends that investors should focus on fundamentally strong companies which will do well over the long term. “ The Indian economy is showing strong growth along with steady corporate earnings. These factors should help keep the markets buoyant over the next few months,” he believes.

Ajay Vora from Nuvama says that the current market situation doesn’t call for panic among investors. “Instead, they should exercise caution by avoiding speculations and gradually keep investing in quality companies with at least 2-3 year horizon,” he tells TOI.