A sudden correction in the last hour’s trade due to renewed geopolitical tensions in Europe dampened the relief rally in domestic equities on Tuesday as key indices erased more than 1% of their day’s gains and ended just marginally higher.
The selling pressure came after concerns that war between Russia and Ukraine could escalate, after the latter used long-range US missiles against Russia. In response to this, Russia has approved changes to its nuclear doctrine, which now says an attack on it from a non-nuclear state, if backed by a nuclear power, will be treated as a joint assault.
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“Since this was not anticipated, it led to some panic selling. We do not know how worse it will get. Investors will have to wait,” said Deepak Jasani, head of retail research at HDFC Securities.
Sensex and Nifty ended the day 0.3% higher at 77,578.38 points and 23,518.50 points, respectively, dropping off from 1.4% gains seen during the day. With this, the Nifty snapped its seven day losing streak.
The broader market too saw a similar trend but outperformed the benchmark indices. After rising around 2% intraday, the BSE Midcap and the BSE Smallcap indices ended 0.9% higher each.
“The market breadth predominantly favored bullish sentiment, with a significant duration spent at elevated levels but the last half hour was a reality check for market participants,” said Osho Krishnan, senior analyst, technical and derivatives at Angel One.
Krishnan said the market texture has remained largely unchanged on a closing basis, but the sell-off in the last half hour reiterates cautious stance.
The foreign portfolio investors (FPIs) sold shares worth Rs 3,412 crore on Tuesday, as per provisional data. This is on top of Rs 21,598 crore shares sold so far this month. On the other hand, domestic institutional investors bought Rs 2,784 crore worth of shares on Tuesday, continuing to support the market.
The sell-off, which started in October, has led to an around 10% correction in key indices since then. G Chokkalingam, founder of Equinomics Research, believes a further correction of 3-5% is possible with broader markets more prone to underperforming.
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