Factors Contributing to Nifty’s Retreat from All-Time Highs

The Indian stock market witnessed a fluctuating session with the Nifty index initially hitting an all-time peak of 22,794.7 amidst a globally positive mood. Similarly, the Sensex soared to access a high of 75,095.18. Yet, as the day progressed, both indices gave in to significant sell-offs, causing the Nifty to retract by over 1% from its historic high.

FII Outflow Persists

Mounting concerns in the market were primarily instigated by Foreign Institutional Investors (FIIs), who continued their sell-off, divesting Indian equities of Rs 964.47 crore as per the latest data. Market expert Chokkalingam G explained that with the anticipation of a new government, FIIs might hold back significant purchases, maintaining their sales streak instead. This, coupled with reticent buying from retail investors, pressured the markets.

Global Market Reactions

After aligning with the upbeat Asian market sentiment during the early hours, Indian markets retreated as speculators cashed in profits. Concern grew with the heightened expectation of a prolonged period of high interest rates in the United States. Meanwhile, markets like Hong Kong's Hang Seng noted gains, and attention shifted to the upcoming US nonfarm payrolls data for further direction.

Broad-Based Sectoral Losses

Sectors across the board, especially IT, PSU Banks, Private Banks, and Realty, were hit, shedding up to 1% amidst the downturn.

Surge in Volatility

Compounding the market’s woes, the India VIX, which gauges expected market volatility, escalated by 10.71% to a reading of 14.89. This spike indicated a surge in market unpredictability.

US Treasury Yields Influence

The yield on the US 10-year Treasury notes experienced a dip to 4.5% before bouncing back to 4.588%, exerting additional influence on Indian market sentiments.

However, there was a sliver of positivity as the US dollar index maintained its downward trend, hitting 105.28. Traditionally, dollar index losses trigger a 'risk-on' sentiment among investors, hinting at some level of market resilience.

Nifty, FII, Volatility