India’s stock market nosedived on Friday as the country’s largest private sector bank HDFC Bank witnessed heavy selling pressure on the back of global index provider MSCI’s announcement regarding the bank. Sensex declined 694 points or 1.13 per cent to close at 61,054. The Nifty index fell 186 points or 1.02 per cent at 18,069.

Heavy selling by foreign portfolio investors (FPIs) in the index and stock futures segment weighed on the markets. FPI selling in stock futures stood at ₹2,126 crore and index futures was at ₹804 crore, as per provisional figures.

Index weightage

Reports said that MSCI was likely to use an adjustment factor of 0.5 while computing the weightage of the merged entity. Effectively, the tweak may lead to $200-million outflows for the mortgage lender against expectations of strong inflows. HDFC and HDFC Bank plunged nearly 5.80 per cent.

HDFC’s market-cap, for the first time in many years, slipped below Government-owned State Bank of India’s m-cap. HDFC share price fell 4.97 per cent to hit a low of ₹2,720 and commanded a m-cap of ₹5,01,7247 crore, down nearly ₹23,400 crore over Thursday’s market-cap of ₹5,25,114 crore. SBI share price rose 1.3 per cent to hit a high of ₹587.35 on BSE, commanding a m-cap of ₹5,24,098 crore against ₹5,17,627 crore in the previous session.

MSCI’s update came a day after HDFC on Thursday reported a 20 per cent year-on-year (y-o-y) rise in its net profit to ₹4,425 crore. HDFC said its assets under management (AUM) grew 10.71 per cent to ₹7,23,988 crore in FY23.

Nifty consolidating

“Nifty is now consolidating around 18,000-18,200 zones. While the overall market structure remains positive, expect Nifty to consolidate in the near term on the back of subdued global cues and profit booking in index heavyweights. Next week, market would also take cues from inflation, State election outcome and ongoing earning season,” Siddhartha Khemka, Head - Retail Research, Motilal Oswal Financial Services, said.

“The positive chart pattern like higher tops and bottoms is still intact and present weakness could be in line with the formation of new higher bottoms. Hence, further weakness from here could signal higher bottom reversal around the next important support of 17,800 levels. Nifty, on the weekly chart, formed a small negative candle with a long upper shadow. This chart pattern hints at a possibility of more weakness in the coming sessions,” said Nagaraj Shetti, Technical Research Analyst, HDFC Securities.

Mixed Asian trends

Asian stocks were mixed, as investors weighed the prospect of the US Fed reversing its policy-tightening campaign ahead of the US jobs data, due later Friday. European stocks were steady as they headed for the worst weekly decline in seven on a busy day of earnings.

“Markets were under a bear hug on the back of a massive profit-taking amid sell-off in HDFC twins, US banking woes and weak Wall Street cues. The negative takeaway was that Nifty Bank tumbled 2.32 per cent on reports that the merger of HDFC twins may result in slight outflows of $150-200 million. Traders will get their first chance to react to US April jobs data to trickle this evening. Expect a volatile session with Nifty’s major hurdles seen at 18,300, while the support to watch out will be at the 17,971-mark,” Prashanth Tapse, Senior V-P (Research), Mehta Equities, said.