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

Indian stock markets took a hit on Wednesday, with BSE Sensex falling over 600 points and Nifty falling below 20,000 points. Nifty recorded one of the weakest sessions in almost a month and Sensex is on track for its worst day since early August.
HDFC Bank suffered the biggest setback within the Nifty 50, declining as much as 3.3%. This decline was a result of the bank’s recognition that the recently completed merger with HDFC Ltd would put pressure on critical financial indicators such as net interest margin and non-performing assets.
Apurva Seth, head of market perspective and research at Samco Securities, told Reuters that the HDFC management has tried to provide some clarity. “There was a lot of uncertainty about what the number of merged entities would be. With the recently concluded analyst meeting, management has tried to provide some clarity,” he said. HDFC Bank, in turn, has also dragged down the overall banking index. According to a Reuters report, the banking index is on track for the biggest intraday decline since August with a decline of 0.7%.
While equity benchmark indices, especially Nifty, were hit by the fall in HDFC Bank and Reliance Industries, the broader global cues were also unfavorable. With the US Federal Reserve’s decision looming, global markets are awaiting the US central bank’s comments. While a rate hike is unlikely at today’s meeting, the commentary could indicate a possible rate hike in November, analysts told TOI, which would be negative for the markets.
Oil prices, which have risen to a 10-month high, have also fueled fears of inflation. The global benchmark Brent was trading at over $95 per barrel, a first since November last year.
Where are the Indian stock markets headed?
Siddhartha Khemka, head of Retail Research, Broking and Distribution, MOFSL told TOI that Nifty is under pressure today due to HDFC Bank and Reliance. “While HDFC Bank has said its key financial ratios will be affected by the merger, Reliance has been hit by crude prices. Moreover, the global signals are not favorable as all eyes are on the US Federal Reserve’s decision and commentary,” Khemka said.
“Overall, we expect some profit booking and caution in the coming days, Nifty and the Indian markets are generally fundamentally strong, so a gradual recovery is likely,” he added.

According to Ajay Vora, Head-Equities, Nuvama Asset Management, Nifty has seen a rally of almost 20% since March end, driven by strong corporate performance and FII/DII inflows. “As crude oil prices move closer to $100, inflation concerns will resurface. This has increased the likelihood that the Fed will raise rates again at its next meeting, which the UST also indicates. This could certainly limit any upside potential in the market in the short term,” Vora told TOI.
PTI quoted VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services, as saying that the markets face multiple challenges in the coming days. “There are too many challenges for the market in the short term. Brent crude at $94, dollar index above 105, US bond yields at 5.09 percent and INR at record lows against the dollar are strong headwinds,” he said.
What should investors do?
What should investors do amid stock market volatility? Is there a reason to book profits, or should they avoid panic selling and focus on the fundamentals?
Sujan Hajra, chief economist and executive director at Anand Rathi Shares and Stock Brokers, points out that most major stock indices are delivering higher returns 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 stocks are inherently volatile in the short term, investors should look at a time horizon of well over 12 months, ideally three years, when looking at equities.
Siddhartha Khemka of Motilal Oswal recommends that investors should focus on fundamentally strong companies that will do well in the long term. “The Indian economy is showing strong growth along with stable corporate profits. These factors should keep markets buoyant in the coming months,” he said.

Ajay Vora of Nuvama says the current market situation does not cause panic among investors. “Instead, they should be cautious by avoiding speculations and continue to invest gradually in quality companies with a horizon of at least two to three years,” he told TOI.