Sensex, Nifty and Nifty Bank took a beating on Monday morning amid fears the market regulator in a board meeting later today could announce measures to curb retail participation in the futures and options (F&O) segment. Most Asian markets fell, with Japan tanking nearly 5 per cent on rate hike fears, but Chinese markets continued its rally, raising fears FPI flows into India may soon get diverted to the reasonably-valued market.
Sensex fell 700.29 points, or 0.82 per cent, to 84,871.56, with the BSE market capitalisation m-cap falling 3.15 lakh crore to Rs 474.77 lakh crore. A total of 2,101 listed stocks on BSE fell, while only 1,195 advanced. A total of 37 stocks hit their 52-week lows while a total 116 stocks hit their respective lower circuit limits. Nifty slipped below the 26,000-mark and was trading 180 points, or 0.69 per cent, lower at 25,998.95. Nifty Bank declined 608.20 points, or 1.13 per cent, to 53,226.10.
Nifty stocks namely Hero MotoCorp Ltd, Bharat Electronics Ltd, Bajaj Auto, Coal India and Reliance Industries fell 2-3 per cent. Axis Bank, ICICI Bank, IndusInd Bank, Mahindra & Mahindra and Tech Mahindra declined 1.5-2 per cent.
A recent SEBI report that suggested 93 per cent of over 1 crore individual F&O traders incurred average losses of around Rs 2 lakh per trader between FY22 and FY24. Sebi recently floated consultation papers, which suggested seven proposals including collection of option premiums on an upfront basis, revision in minimum contract size, rationalisation of weekly index products, intraday monitoring of position limits, rationalisation of strike prices, removal of calendar spread benefit on expiry day and increase in near contract expiry margin.
If implemented fully, they are seen hitting the stock market volumes by about 30-40 per cent and earnings of domestic stock exchanges by 15-30 per cent. Media reports suggested SEBI may consider such proposals today.
To recall, the government increased STT on futures and options in the Union Budget 2024, which analysts said could have a significant dampening effect on the derivatives trading from October 1.
Nifty Bank
Nifty Bank had formed a shooting star candlestick on the weekly chart, which indicated a potential reversal signals at higher levels. Sumeet Bagadia, Executive Director at Choice Broking said.
"This pattern suggests that despite the initial bullish momentum, sellers managed to push prices lower towards the end of the week, which could be a cautionary sign for traders. Going forward, the behaviour of the index near key support and resistance levels will be crucial in determining the next trend direction, with immediate support at 53,500, followed by 53,000 on a closing basis.
Global markets
Japan markets fell today, as the incoming PM Ishiba has been slightly hawkish regarding monetary policy, which is consistent with the BOJ’s current policy stance. Nomura said Bank of Japan (BOJ) looks set to hike interest rates in December 2024.
Meanwhile, China's mainland Shanghai Composite index soared 5.7 per cent, while Hong Kong's Hang Seng also jumped 3.7 per cent.
"One significant factor that is influencing foreign portfolios is the outperformance of the Chinese stocks which is reflected in the massive surge in the Hang Seng index by around 18 per cent in September. This surge has been triggered by hopes of revival in the Chinese economy in response to the monetary and fiscal stimulus announced by the Chinese authorities. The cheap valuations of Chinese stocks are keeping the momentum intact. This can prove to be a tactical trade which can sustain for some more time," said V K Vijayakumar, Chief Investment Strategist, Geojit Financial Services.
"This means FIIs may continue to sell in India and move some more money to better performing markets. FII selling is unlikely to impact the Indian market significantly since the massive domestic money can easily absorb whatever the FIIs are selling. Investors can use dips to buy quality largecaps which are fairly valued."