Stock market Sensex – Sensex, Nifty: 5 reasons why stock market is falling today; more pain ahead?

Benchmark stock indices Sensex and Nifty fell in Friday’s trade, in line with the selloff in US stocks overnight. The slide in US equity benchmarks was triggered by data showing a surprise rise in US jobless claims and a weak commentary from Walmart. A renewed interest in the mainland Chinese equities and strong foreign outflows from India are a key concern. Fears of reciprocal Trump tariffs, which can push inflation in the US higher and hit the world’s largest economy, is another concern. Earnings in India are not something to take home about. Add to that are India’s relative stock market valuations that looks expensive in the uncertain global backdrop. All these factors are weighing on the key stock indices that have now fallen in 13 of past 15 sessions.

On Friday, the BSE Sensex stood at 75,352.10, down 383.86 points or 0.51  per cent. Nifty fell 118 points or 0.51 per cent to 22,795.25. M&M dropped 5.8 per cent to Rs 2,675. UltraTech Cement, Tata Motors, Power Grid and ICICI Bank declined up to 2.5 per cent. Adani Ports, Zomato, Sun Pharma and Maruti Suzuki India were some other key Sensex losers.  

ICICI Securities said the market breadth indicator is showcasing extreme pessimism, as the percentage of stocks above 50-SMA and 200-SMA within Nifty 500 universe witnessed bearish extreme level  of 13 in the current week. 

“Historically, such an extreme reading led to abating downward momentum in subsequent weeks, eventually paving the way for a durable bottom. Hence, focus should be on accumulating quality stocks on dips backed by strong earnings,” it said.

V K Vijayakumar, Chief Investment Strategist, Geojit Financial Services said the market is negatively responding to potential tariff targets like autos and pharmaceuticals and looking for opportunities in domestic consumption plays, which will not be impacted by tariff threats. 

This is likely to be a short-term trend since Trump’s strategy is to threaten with tariffs and then negotiate for tariff reduction on US exports. It will take time for this to play out, said Vijayakumar said. 

Vijayakumar said higher tariffs on imports into the US is not in the interest of the US since it will be inflationary, inviting hawkish comments from the Fed, which, in turn, will impact the US stock market. 

“Trump will not like this outcome and, therefore, he is using the interim period to negotiate with trading partners. The FII selling in India is likely to continue, particularly in the context of renewed interest in Chinese stocks which are cheap and are staging a smart recovery. FII selling will continue to put pressure on largecaps,” he said.

For stock market, the recent earnings season too was a disappointment. Elara Securities noted that its universe continued to see a decline in the beat-to-miss ratio, which fell to 0.6 times in Q3 from 0.7 times in Q2. 

“Small-caps  saw a larger proportion of misses at 63% while large- and mid-caps saw 32 per cent and 41 per cent  misses, respectively. On the sector front, banks and information technology had a  stronger beat-to-miss ratio, with one miss in each sector while auto, energy and consumer discretionary had a weaker ratio owing to higher number of misses,” it noted.

Nomura India said the recent stock market selloff has been similar to regional markets such as Indonesia and Thailand, thanks to market fatigue after the strong run, when expectations were set high. Incrementally, economic and earnings growth were below the expectations, resulting in valuation multiple for Nifty moving lower to 19 times one-year forward earnings against 21.3 times at the peak in September 2024, it said.