Market Rout: Sensex & Nifty Snap 6-Day Winning Streak on Global Jitters

The six-day winning streak on Dalal Street came to an abrupt end today, as Indian stock market benchmarks snapped their longest rally in recent weeks. A wave of profit-booking and cautious sentiment ahead of key global events led to a sharp downturn, erasing a significant portion of the week’s gains.

The BSE Sensex plunged 693.86 points, or 0.85%, to close at 81,306.85. Similarly, the NSE Nifty 50 shed 213.65 points, or 0.85%, to settle at 24,870.10. The reversal in market mood saw investor wealth erode by over ₹3.5 lakh crore, as global anxieties overshadowed recent domestic optimism.

Decoding the Triggers Behind the Sell-Off

The decline wasn’t triggered by a single domestic issue but rather a confluence of factors that prompted traders to take profits off the table after a stellar run.

1. Global Jitters over Jackson Hole Symposium: The primary factor weighing on global markets is the anticipation surrounding US Federal Reserve Chair Jerome Powell’s speech at the annual Jackson Hole economic symposium. Investors are keenly awaiting any indication of the future direction of US interest rates. A hawkish (rate-hike-oriented) tone from Powell could dampen market spirits worldwide. “Investor sentiment turned cautious ahead of the US Fed Chair’s speech… which is expected to provide critical insights into the global liquidity outlook and future interest rate trajectory,” noted Vinod Nair, Head of Research at Geojit Investments.

2. Profit-Booking After a Strong Rally: The market was arguably due for a breather. With both Sensex and Nifty having rallied for six consecutive sessions, many investors saw this as an opportune moment to cash in their gains. This is a common phenomenon where a prolonged rally leads to a “sell-on-rise” sentiment.

3. Lingering US Tariff Concerns: Underlying worries about potential US tariffs on certain Indian goods also contributed to the negative sentiment. With a reported deadline approaching, institutional investors have turned nervous, leading to some risk aversion.

4. Broad-Based Sectoral Pressure: The selling pressure was widespread, indicating a market-wide risk-off sentiment. Key sectors like Nifty Bank, FMCG, Metal, and IT all ended in the red. Nifty Bank was a significant loser, dropping 1.09%. Index heavyweights such as ITC, HCL Tech, Asian Paints, and UltraTech Cement were among the top draggers.

The Silver Lining: A Healthy Correction?

While a sharp fall can be unsettling, many analysts view it as a healthy correction. Markets cannot move in one direction indefinitely, and periodic pullbacks are crucial for a sustainable long-term uptrend.

Despite the day’s losses, both the Sensex and Nifty managed to close the week with gains of around 1%, marking their second consecutive weekly rise. This suggests that the underlying positive momentum has not been completely derailed.

The advance-decline ratio was skewed towards sellers, with 2,322 stocks declining on the BSE against 1,757 advancing. However, the broader markets—the BSE Midcap and Smallcap indices—saw smaller losses of 0.23% and 0.35% respectively, indicating that the selling pressure was more concentrated in large-cap stocks.

What Investors Should Watch Next

For retail investors, the key is to remain calm and focus on the bigger picture. Here are a few factors to monitor in the coming days:

• Jerome Powell’s Speech: The outcome of the Jackson Hole symposium will set the tone for the market next week. Any hints of a less aggressive monetary policy from the Fed could bring the bulls back.
• US Tariff Developments: Any positive news or delay regarding the potential tariffs could provide a significant boost to market sentiment.
• Nifty’s Technical Levels: Technical analysts are watching key support levels. According to Rupak De, Senior Technical Analyst at LKP Securities, the Nifty has immediate support at 24,800. As long as the index holds above this level, the short-term uptrend remains intact. A breach below this could signal further weakness.
• FII Activity: Foreign Institutional Investors (FIIs) were net buyers on Thursday, purchasing equities worth ₹1,246.51 crore. Their trading patterns in the coming week will be a key indicator of foreign investor confidence.

Today’s market action is a timely reminder of the inherent volatility of equity markets. While the six-day party has paused, it isn’t necessarily over. Investors should use this opportunity to review their portfolios, focus on quality stocks, and stay informed about key global and domestic triggers.

Disclaimer: This article is for informational purposes only and should not be considered investment advice. Please consult with a financial advisor and conduct your own research before making any investment decisions.