Summary of the Day's Market Performance

• Indian equity indices ended sharply lower on October 3 due to widespread selling across sectors.

• The Sensex plummeted by 1,769 points, closing at 82,497, while the Nifty dropped 546.80 points to end at 25,250.10.

• The BSE Midcap and Smallcap indices were also down by 2% each.

Performance of Key Sectors

• All sectors ended in the red: The realty sector was the biggest loser (-4.5%), followed by auto, banks, media, capital goods, and oil & gas sectors, which declined between 2-3%.

Market Transactions:

• Foreign Institutional Investors (FII): ₹-15,243.27 crore (Net Sellers)

• Domestic Institutional Investors (DII): ₹12,913.96 crore (Net Buyers)

Foreign institutional investors were heavy sellers, while domestic institutions stepped in as buyers, although their efforts weren't enough to prevent the decline.

• Geopolitical Tensions: The escalation in the Middle East has created fear of supply disruptions, which could drive up oil prices and cause inflationary challenges for India.

• SEBI Impact: New regulations in the F&O segment are expected to dampen trading volumes, especially in mid and small-cap stocks.

• FII Exodus: Foreign funds are moving to China due to better valuations, which is adding further pressure on Indian equity markets.

Oil prices have been declining as OPEC signals production increases, which is providing some relief to industries heavily reliant on energy costs.

Key Stock Movements and News

• Biggest Nifty Losers: BPCL, L&T, Tata Motors, Shriram Finance, and Axis Bank led the declines.

• Biggest Nifty Gainers: JSW Steel and ONGC.

• Tata Motors: Fell -4% after reporting a 15% YoY decline in September sales.

• ITD Cementation: Locked in a +20% upper circuit after winning a ₹1,937 crore construction order.

• Paint & Tyre Stocks: Asian Paints, Berger Paints, MRF, and JK Tyre dropped 3-4% following the surge in crude oil prices.

• BPCL, HPCL, IOCL: Slumped up to 4% amid fears of further oil price hikes due to the Middle East crisis.

• ITC: Acquired 100% of Blazeclan Technologies for ₹485 crore.

• Reliance Power: Locked in a +5% upper circuit after signing a renewable energy deal with Bhutan for 1,270 MW.

• Oil Imports: India increased oil imports from Saudi Arabia and Iraq by 16% and 37% respectively in September, while Russia remained the top supplier.

• Brokerage Updates:

  • Investec: Maintains a 'buy' rating on Angel One, with a target raised to ₹3,000.

  • Morgan Stanley: Upgrades Tata Steel to 'equal-weight' from 'underweight' and raises the target to ₹175 from ₹135.

• ITD Cementation: Secured a major construction order, likely supporting near-term stock growth.

• Tata Motors: Weak sales figures are concerning, but long-term prospects remain dependent on industry recovery.

• Angel One: Positive outlook with a target price hike, supported by strong fundamentals.

SEBI has introduced measures to stabilize the index derivatives market and protect investors:

1. Weekly Expiry Contracts: Each exchange will only offer derivatives on one benchmark index with a weekly expiry.

2. Higher Trading Limits: The minimum contract size for derivatives will be increased to ₹15-20 lakhs, starting November 20, 2024.

3. Phased Rollout of Rules:

   • November 20, 2024: Weekly expiry contracts, increased contract sizes, and an additional 2% Extreme Loss Margin (ELM) for options will be implemented.

   • February 1, 2025: Upfront collection of option premiums and removal of calendar spread benefit on expiry day.

   • April 1, 2025: Intraday monitoring of position limits will begin.

4. Focus on Stability: The changes come as SEBI observed highly speculative trading on expiry days, which can increase market volatility. Daily expiries will no longer be allowed, and measures will be taken to discourage excessive speculation.

5. Higher Contract Sizes: Due to market growth, SEBI has increased the contract sizes to ensure appropriate risk levels are maintained.

6. Increased Margin Requirement: An additional 2% ELM will be applied on expiry days to reduce risk from speculative trading.

7. Upfront Premium Collection: Brokers must collect option premiums upfront to limit excessive leverage during the day.

8. No Calendar Spread Benefit on Expiry Days: Calendar spread benefits will not be available on contracts expiring that day to avoid excessive risks.

9. Intraday Position Monitoring: Exchanges will monitor position limits multiple times a day to prevent excessive risk-taking.

These measures aim to reduce speculation, improve market stability, and ensure better protection for investors.

The Indian markets suffered a steep decline as geopolitical tensions in the Middle East and new SEBI regulations spooked investors. All sectors saw losses, with the realty and auto sectors hit the hardest. Foreign outflows continued as FIIs moved funds to Chinese markets amid better valuations. Despite domestic institutions stepping in as buyers, it wasn't enough to counter the downward pressure. The markets are expected to remain volatile as investors digest the impact of global events and await further insights from domestic Q2 earnings reports and the upcoming RBI policy meeting.

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Disclaimer: The information provided in this newsletter is for informational purposes only and should not be considered financial advice.

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