Nifty, Sensex Drop Extends To Second Day Amid Valuation Concerns: Midday Market Update

India's benchmark indices fell for the second day on Thursday, led by losses in information stocks, as market participants remained cautious about overpriced domestic stocks. The NSE Nifty 50 and the S&P BSE Sensex slipped as much as 0.19% and 0.2%, respectively, so far in the day, even as most Asian indices rebounded following Wednesday's selloff.

At 12:15 p.m., the 50-stock NSE Nifty was trading 9.8 points, or 0.04%, lower at 25,188.9, and the 30-stock Sensex was down 43 points, or 0.05%, at 82,309.3.

India has surpassed its rival China to secure the largest weighting in the MSCI EM investable market index, and is poised to surpass its neighbor as the largest emerging market. India's rising weight in a key emerging market index would draw more absolute foreign flows, according to Morgan Stanley.

On the listing front, Raymond Lifestyle Ltd. was locked in a 5% lower circuit after a stellar market debut on Thursday. Shares of the company listed at Rs 3,000 apiece on the BSE on Thursday, a premium of 99.5% over its base price of Rs 1,503.3 per share.

Stability in US markets sets the tone for the resumption of rally in India, according to VK Vijayakumar, chief investment strategist at Geojit Financial Services. But there is no room for a breakout taking the benchmark indexes to much higher levels, he said. "In the present context of elevated valuations, investors should refrain from aggressive investment in poor-quality stocks."

Most Asian indices bounced back from Wednesday's sell-off, and global bond yields fell as a weak economic print in the US brought back wagers that the Federal Reserve will initiate a half-point interest cut in September. The MSCI Asia Pacific index, excluding Japan, advanced by 0.28% to 687.14 during the day.

From a technical standpoint, the pullback post the setback construes a positive scenario, with strong support being seen around the 25,100-25,080 spot zone for Nifty, according to Sameet Chavan, head of research, technical and derivative at Angel One. "On the higher end, the highs of 25,300-25,350 is now expected to be seen as a resistance."

Shares of Titan Co., ITC Ltd., State Bank of India Ltd., Sun Pharmaceutical Industries Ltd., and Tata Steel Ltd. cushioned the loss in the Nifty 50.

While those of Larsen & Toubro Ltd., Bharti Airtel Ltd., Infosys Ltd. Bajaj Finance Ltd. and Tata Consultancy Services Ltd. weighed on the index.

On NSE, nine of the 12 sectors advanced, with Nifty Media and PSU Pharma rising the most during the session. The Nifty Realty and Auto fell the most on Wednesday.

Broader markets outperformed the benchmark indices. The BSE Midcap and Smallcap were up 0.45% and 0.68%, respectively.

On BSE, eight of the 20 sectors declined, with BSE Reality and Capital goods leading the fall.

Market breadth was skewed in the favour of the buyers. Around 2,342 stocks rose, 1,453 stocks declined, and 141 stocks remained unchanged on the BSE.