Sensex falls 500 pts from day's high, Nifty below 25,250: Key reasons behind markets turning red

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Benchmark indices Sensex and Nifty completely erased their early gains to trade in mild red on November 12 due to various reasons, including profit booking.

At 12:12 pm, the Sensex was down 42.59 points or 0.05% at 81,836.81, and the Nifty was down 23.75 points or 0.09% at 25,231.30. About 2,249 shares advanced, 1,647 shares declined, and 175 shares were unchanged.

Non-banking financial companies remained the top gainers in the Nifty 50 index. HDFC Life Insurance Co., SBI Life Insurance Co., Shriram Finance, Bajaj Finserv, and Bajaj Finance were up 2-3%. The index tracking the sector, Nifty Financial Services, was up over 1%. The shares of insurance companies rose after the data released by the Life Insurance Council showed the first-year premium income of life insurance companies rose 26.2% on year to Rs 42,914 crore in October. Meanwhile, the first-year premium income in Apr-Oct rose 21.4% on year to Rs 2.89 lakh crore. Banks continued their positive momentum supporting the gains in the index. ICICI Bank, HDFC Bank, and State Bank of India were up 0.5-1.5%. The Nifty Bank was up 0.6%.

Meanwhile, fast-moving consumer goods company Nestle India was the top laggard in the Nifty 50 index, down nearly 2%. Heavyweight Bharti Airtel and automobile major Mahindra & Mahindra were down around 1% each, limiting the gains in the index. Infrastructure major Larsen & Toubro also weighed on the headline indices, down 0.5%.

Key reasons behind markets turning red

1) Profit booking

The markets saw profit booking at higher levels as the benchmarks hit eight-month high on November 12. Robust FII inflows have pushed the Nifty 50 and Sensex indexes up 9.6% and 10%, respectively, so far in November.

Sensex fell 500 points from day's high while Nifty was trading below 25,250-mark.

"Despite (Wednesday's) positive close, rejection from higher levels indicates some near-term profit booking," said Hitesh Tailor, technical research analyst at Choice Broking.

The benchmark indices had closed nearly 1% higher on Wednesday, after rising as much as 1.7% intraday.

However, the overall market structure remains positive, backed by strong FPI participation and continued strength in banking stocks, Tailor added.

2) Selling in IT, pharma shares

Selling in IT, pharma shares led to the markets turning red on November 12.

3) Technical reason

Nifty needs to trade above 25,400 for any further bullishness to emerge in the market, said analysts.

"The immediate support zone is at 25,150–25,200, while resistance is likely around 25,500–25,600. With Sensex weekly expiry today, volatility is expected to remain elevated, and sharp intraday swings cannot be ruled out. Despite the lack of strong opening cues, the broader momentum remains positive as long as Nifty holds its immediate support zone.

"A buy-on-dips approach remains preferable, but traders should avoid chasing moves, especially during the expiry session. The market's ability to sustain above 25,300 will be important for further upside, while a break below support could invite some profit-booking," said Gaurav Udani, Founder, Thincredblu Securities.

"Failure to move above 25,500 will lead to some consolidation in the range of 24,700-25,500 amid stock specific action as we progress through the fag end of the quarterly earning session. Index has immediate support placed at the last week breakout area of 24,700. Nifty has seen a strong up move of more than 3000 points in the last 12 sessions. Hence, some consolidation cannot be ruled out at higher levels.

"Short-term support in Nifty is placed at 24,000-24,300 levels. Index holding above the same will keep the overall bias positive and dips should be used as a buying opportunity," said Pabitro Mukherjee, Deputy Vice President-Research, Bajaj Broking.

"In terms of levels, the 25,100-25,050 band is an immediate support, followed by a stronger support in the 24,850-24,750 band. On the flipside, 25,250-25,300 is likely to act as immediate hurdle, followed by a stronger hurdle in the 25,450-25,500 zone," said Angel One.

Dropping below 25,200 invites intraday profit-booking, leaving 25,000 as critical support to prevent deeper distribution, said Hemang Gor, Senior Research Analyst – Derivatives & Technical Research, Axis Direct.