Both key indices had clocked modest gains in the previous session on Tuesday. However, they resumed their downward march on Thursday on lingering concerns over weak earnings, geopolitical tensions, and stretched valuation. The US indictment of Adani Group Chairman Gautam Adani and other senior executives on bribery charges dealt a fresh blow to sentiment.
Let’s take a look at the key factors behind the market selloff.
1. The Adani saga
Several Adani Group shares hit their lower circuits in early trade on Thursday after Gautam Adani was indicted in New York over his role in an alleged multibillion-dollar bribery and fraud scheme.
2. Concerns over weak Q2 earnings
Q2 earnings came out significantly weak. The July-September quarter numbers of the majority of companies disappointed markets.
Global cyclicals, such as oil and gas, along with metals, cement, chemicals, and consumers, weighed on earnings growth. Consumption has emerged as a weak spot, while select segments of BFSI are experiencing asset-quality stress. Weakness in government spending has also been one of the factors driving moderation in earnings.
3. Escalating geopolitical tensions
Fresh escalation in the Russia-Ukraine war has soured the market mood further. Russian President Vladimir Putin signed a revised nuclear doctrine on Tuesday, days after the US allowed Ukrainian use of longer-range missiles against Moscow.
4. Heavy foreign capital outflow
Foreign portfolio investors (FPIs) have been relentlessly selling Indian equities, which has been among the key reasons behind the recent market downtrend.
According to NSDL data, FPIs sold Indian stocks worth ₹94,017 crore in October, and they sold stock for an additional ₹25,942 crore in November till the 19th.
5. Technical factors
Nifty 50 is trading below its 200-day moving average of 23,575. The market structure is weak and the 23,100-22,800 levels are crucial.
