The Nifty experienced a downturn after four consecutive weeks of gains, dropping by 2.1% for the week and forming a bearish engulfing pattern on the weekly charts, according to Deepak Jasani, Head of Retail Research at HDFC Securities. Jasani noted that the Nifty faced selling pressure on rallies and anticipated this trend to persist.
On Friday, the Nifty declined, retracing its steps from the previous session’s rally. The index closed the day at 22,023.35, down by 123 points or 0.56%, while the Sensex concluded with a loss of 454 points or 0.62%, ending at 72,643.43.
High cash market volumes on the NSE, amounting to Rs 1.50 lakh crore, were supported by FTSE index rebalancing volumes towards the session’s end. Despite this, the smallcap index finished positively, with an advance-decline ratio of 0.83:1, as observed by Jasani.
In the global market scenario, Asian markets largely mirrored the downtrend seen on Wall Street, prompted by a significant rise in US wholesale prices, which dashed hopes for potential interest rate cuts. On the other hand, European stocks were poised for their eighth consecutive week of gains, driven by the expectation of imminent interest rate reductions in the euro area.
Vaibhav Vidwani, a Research Analyst at Bonanza Portfolio, highlighted the impact of mutual funds releasing stress test findings, leading investors to withdraw from small and midcap equities. Concerns surrounding inflated valuations and SEBI’s scrutiny of mutual funds serving the industry contributed to the recent decline in mid and small-cap stocks, dampening investor sentiment.
Additionally, fears have arisen regarding the buildup of froth in small and midcap mutual fund schemes following SEBI’s directive to AMFI for enhanced disclosures to safeguard investor interests. Vidwani noted that amidst challenging market conditions, stress tests aim to determine the earliest possible time for fund managers to liquidate holdings in response to investor redemption requests.
