Sensex Down 636 Points, Nifty at 24,542; Tomorrow Nifty Prediction
Markets End Lower for Third Straight Day: What Lies Ahead on June 4 as India Awaits Election Outcome
Indian equities ended in the red for a third consecutive session on June 3, 2024, as investors booked profits across most sectors ahead of the Lok Sabha election results, due to be announced on June 4.
Heightened caution, weak global cues, and persistent foreign fund outflows contributed to the decline, with the Nifty 50 closing below the key psychological mark of 24,550.
Benchmark Indices Snapshot
At the close of trade on Monday:
- The S&P BSE Sensex fell by 636.24 points, or 0.78%, to settle at 80,737.51.
- The Nifty 50 declined by 174.10 points, or 0.70%, ending the session at 24,542.50.
Market breadth remained negative, with 2,148 stocks declining, compared to 1,701 advancers, while 134 stocks remained unchanged. The weak breadth reflects broad-based selling, especially in large-cap and index-heavy stocks.
Broader Market Performance
- The BSE Midcap index dropped 0.5%, underperforming slightly.
- The BSE Smallcap index managed to hold ground, closing almost flat, signaling selective buying interest in smaller, fundamentally strong companies.
Sectoral Trends
Profit booking hit almost all sectors, with real estate stocks being the notable exception. Expectations of an interest rate cut by the Reserve Bank of India (RBI), coupled with strong demand trends in residential and commercial real estate, buoyed investor sentiment in this sector. The BSE Realty index rose 1%, extending its outperformance.
In contrast, selling pressure was visible across key sectors:
- Bank Nifty, Capital Goods, Consumer Durables, Information Technology, Oil & Gas, Power, Private Banks, and PSU Banks all fell between 0.5% and 1%.
- Weakness in banking stocks, despite being relatively more resilient, was led by cautious positioning ahead of the election results and global uncertainties.
Top Nifty Gainers and Losers
Top Gainers:
- Grasim Industries
- Shriram Finance
- Mahindra & Mahindra
- Bajaj Auto
- Cipla
Top Losers:
- Adani Ports
- Bajaj Finserv
- Adani Enterprises
- Coal India
- Power Grid
While auto and pharma names outperformed on stock-specific triggers, high-beta stocks from the Adani Group faced selling pressure amid global risk aversion.
Expert Take: Technical and Market Outlook
Ajit Mishra, SVP of Technical Research at Religare Broking, pointed out that the market was highly volatile throughout the day, reflecting investor nervousness ahead of a major political event.
After showing strength in early trade, the Nifty sharply reversed and breached its short-term support near the 20-Day Exponential Moving Average (20-DEMA), closing at the intraday low of 24,539.
“This is the first time in nearly six weeks that Nifty has decisively broken below the 20-DEMA, which may open the door to further downside towards the 24,200–24,400 range in the near term,” Mishra said.
However, he added that relative strength in the banking sector could offer some support, provided volatility remains contained.
From a technical perspective, breaking multiple support levels ahead of a major event like election results increases the likelihood of a short-term trend reversal if political developments do not meet market expectations.
Macro Factors Adding Pressure
In addition to domestic uncertainty, global factors weighed on investor sentiment:
- Weak global cues from U.S. and European markets, amid renewed concerns about inflation and interest rates.
- Geopolitical tensions in the Middle East and Eastern Europe, which continue to affect crude oil prices and global risk appetite.
- Volatility in currency markets, fueled by a weakening U.S. dollar, added to uncertainty for foreign investors.
According to Vinod Nair, Head of Research at Geojit Financial Services, the market is navigating through a phase of heightened caution.
“Global signals remain mixed, and the dollar’s weakness has created instability in the currency market.
This, coupled with geopolitical tensions, has led to cautious sentiment in the domestic equity market,” he explained.
He added that investors were also reacting to the possibility of an RBI rate cut, which, while positive for rate-sensitive sectors like real estate, also triggered profit-booking across sectors as investors reassessed their positions ahead of the central bank’s monetary policy meeting.
Mid- and Small-Cap Resilience
Despite consolidation in large-cap names, mid- and small-cap stocks displayed relative resilience, thanks to better earnings growth visibility and stronger valuations.
Nair noted, “We expect the market to continue consolidating in the short term, but stocks with strong domestic fundamentals and less global exposure may outperform.”
Sectors such as infrastructure, automobiles, FMCG, and select financials are expected to remain in focus due to their robust domestic demand base.
Election Day Catalyst – Modi 3.0 in Focus
All eyes are now on the Lok Sabha election results scheduled for June 4, 2024. Market participants have priced in a Modi-led NDA government returning to power, and any deviation from this expected outcome could result in sharp volatility.
Historically, political continuity has been viewed positively by equity markets, especially for sectors aligned with government-driven capex and policy reforms. A strong majority for the ruling coalition could revive risk appetite and lead to fresh highs in benchmark indices.
However, analysts caution that even with a favorable outcome, markets may witness a “sell on news” reaction in the very short term, followed by a renewed focus on corporate earnings, monsoon progress, and global central bank actions.
What to Watch on June 4 and Beyond
- Election Results: The market’s reaction will depend on the nature of the mandate — a decisive win may bring short-term relief and long-term confidence.
- RBI Policy Expectations: Clarity on the timing and scale of a possible rate cut.
- FII Flows: Sustained selling by foreign institutional investors has been a drag; any reversal could support a rebound.
- Global Cues: U.S. Fed commentary and economic data remain crucial for global equity sentiment.
- Technical Levels: Watch for support near 24,200 on the Nifty; breach of this level could trigger broader weakness.
Final Thoughts
With political uncertainty set to ease by June 4 and macro headwinds still in play, the near-term market outlook remains cautious. Investors are advised to adopt a stock-specific, sector-rotation strategy and avoid aggressive bets until clarity emerges on both political and policy fronts.
Defensive plays and domestically driven themes may provide stability during this transitional phase.
