Stock market today: Sensex, Nifty 50 fall for the third session in a row; midcaps, smallcaps underperform

Stock market today: Indian stock market benchmarks—the Sensex and the Nifty 50—extended their losses into the third consecutive session on Tuesday, August 6, as investors remained cautious amid prevailing concerns over an economic slowdown in the US, geopolitical tensions in the Middle East, and the markets' rich valuations.

Key indices opened higher and traded in the green for most part of the day. They, however, failed to hold altitude and ended in the red due to profit booking during the last hour of trade. 

The Sensex opened at 78,981.97 against its previous close of 78,759.40 and jumped over a per cent to the level of 79,852.08 during the session. On the other hand, the Nifty 50 started the day at 24,189.85 against its previous close of 24,055.60 and climbed over a per cent to reclaim the level of 24,382.60.

The Sensex finally ended the day at a loss of 166 points, or 0.21 per cent, at 78,593.07. The Nifty 50 closed at 23,992.55, down 63 points, or 0.26 per cent.

The midcap and smallcap indices underperformed the benchmarks. The BSE Midcap index fell 0.71 per cent, while the Smallcap index ended 0.57 per cent lower.

The overall market capitalisation of the firms listed on the BSE slipped to nearly ₹440 lakh crore from nearly ₹442 lakh crore in the previous session, making investors poorer by about ₹2 lakh crore in a single session.

"The domestic market tried to rebound, mirroring the Asian markets. However, momentum was short-lived and closed below the threshold level of 24,000. Investors are watching the appreciating Yen, weak US economic data, and rising geopolitical tensions," Vinod Nair, the head of research at Geojit Financial Services, observed.

"Investors are now exercising caution and shifting towards defensive sectors such as FMCG, IT, and pharma. Nonetheless, the market is looking forward to the decline of crude prices and potential rate cuts by the US Fed and RBI to mitigate the downturn risk," Nair said.

The Nifty 50 saw 21 stocks ending in the green and 29 closing with losses.

Shares of Britannia (up 2.81 per cent), JSW Steel (up 2.35 per cent) and Tech Mahindra (up 1.74 per cent) closed as the top gainers in the index.

On the flip side, shares of HDFC Life (down 4.28 per cent), SBI Life (down 2.43 per cent) and BPCL (down 1.84 per cent) ended as the top losers in the index.

The markets went into a tailspin in the previous session on fears of a looming recession in the US after weaker-than-expected July payroll data. Experts believe it is too early to conclude that the world's largest economy is to slip into a recession. While there may be some signs of a slowdown, the US economy is not showing any clear signs of a sharp downturn.

"It appears that the US recession fears are a bit premature and overdone. Investors need not panic. Quality largecaps can be slowly accumulated," said V K Vijayakumar, Chief Investment Strategist, Geojit Financial Services.

G. Chokkalingam, the founder and head of research at Equinomics Research Private Ltd., also observed that it is too early to fear that the US economy is to slip into a recession. There is no clear signal that the US economy is going to see a sudden and sharp crash.

Experts pointed out that the primary reason behind the market crash was the high valuation globally, except for Chinese markets. There was a conspicuous mismatch between liquidity and market capitalisation.

The focus now is on the monetary policy decision of the Reserve Bank of India. The meeting of the Reserve Bank of India's (RBI) Monetary Policy Committee (MPC) is underway, and its outcome is due on August 8.

Most experts believe the central bank will maintain a status quo on repo rates. However, a few believe that there could be a shift in the policy stance of the RBI.

The technical setup of the market suggests some sort of indecisiveness.

According to Rupak De, Senior Technical Analyst at LKP Securities, the Nifty 50 formed an inverted hammer pattern on the half-hourly chart, suggesting a possible bullish reversal of a smaller degree. Also, the index seems to have found support above yesterday's low.

"Now, two things might happen: one, the Nifty might recover towards 24,400-24,440 (21EMA), where selling pressure is likely to occur once again; or, it might fall straight away to 23,965 (50EMA)/23,650," said De.

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