Why Sensex, Nifty slumped on June 17: US Fed rates, Israel-Iran conflict, FII selloff and more

The impending US Federal Reserve rate cut decision due later this week factored into investor caution on Tuesday, as they stayed away from Indian equities, pulling them down. The volatility associated with the escalation in the Israel-Iran conflict added fuel to the fire.

Market benchmarks Sensex and Nifty fell in early Tuesday trade after investors started booking profits following the Monday rally.

The BSE Sensex fell as far as 324 points to hit a morning low of 81,471.89 while the NSE Nifty slid by 100 points to a morning low of 24,846.45 points.

Sun Pharma, Bajaj Finance, IndusInd Bank, Eternal, Tata Motors, Titan, and Ultratech were among the major laggards, offsetting any gains led by Asian Paints, Axis Bank, HCL Tech, and NTPC.

Among the major Asian markets, only South Korea and Japan were trading in the green, following the US market’s high close on Monday. Hong Kong’s Hang Seng index and Shanghai’s SSE Composite slipped in morning trading.

V.K. Vijayakumar of Geojit Investments, however, maintained that stock markets were “steady and resilient” despite the escalation of the Iran-Israel conflict. “The main contributor to the market resilience is the retail investors using every dip in the market as a buying opportunity. Valuations do not appear to deter retail investors.”

However, this did not deter foreign institutional investors (FIIs), who offloaded equities for four consecutive trading days. On Monday alone, FIIs offloaded equities worth ₹2,539.42 crore, bringing the total offloaded stock for the past four days to just over ₹8,000 crore.

However, Vijayakumar highlighted the healthy domestic investor (DII) buying. “This FII selling has been completely eclipsed by DII buying of ₹19,800 crore. Sustained retail funds flows, mainly through SIPs, are empowering the DIIs to buy consistently,” added Vijayakumar.

On Monday alone, DIIs bought ₹5,780.96 crore worth of equities, as per exchange data.

Tuesday’s slump goes directly opposite Monday’s rally, which saw the Sensex add 677.55 points and the Nifty gain 227.90 points.

Despite the slum, shares of big data tech company Sterlite Technologies soared by at least 15 per cent after it announced an expansion in its data centre portfolio. Last week, Sterlite Technologies announced that it had secured an agreement with Bharat Sanchar Nigam Limited (BSNL) for a network project valued at ₹26.31 billion, inclusive of taxes.

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