Stock market update: Sensex drops 380 points, Nifty hovers just above 22,300 mark

While major Asian and European markets posted gains, buoyed by expectations of rate cuts by the US Federal Reserve due to recent data indicating a slowdown in the US labor market, India's indices took a different trajectory.

Japan's Nikkei surged by 1.54 percent, Korea's KOSPI by 2.11 percent, and China's Shanghai Composite Index by 0.22 percent.

Similarly, European peers like the UK's FTSE rose by over one percent, and Germany's DAX by about one percent at the time of the Sensex closure.

Investors in the Indian stock market continued to engage in selling amid ongoing concerns regarding the market's premium valuation without fresh catalysts.

Heavy selling by foreign portfolio investors (FPIs) ahead of the Lok Sabha election outcome, scheduled for June 4, was cited as a significant factor contributing to the recent downturn.

The Sensex concluded with a loss of 384 points, or 0.52 percent, at 73,511.85. Key stocks such as ICICI Bank, HDFC Bank, Reliance Industries, and Power Grid weighed heavily on the index.

The Nifty 50 finished 140 points, or 0.62 percent, lower at 22,302.50, with 34 stocks registering losses. This marked the third consecutive session of declines for the Nifty 50 index.

The volatility index, India VIX, surged over 2 percent to reach 17.

Both the midcap and smallcap segments experienced significant declines, with the BSE Midcap index plummeting by 1.90 percent and the Smallcap index closing with a loss of 1.65 percent.

The collective market capitalization of BSE-listed firms dipped to approximately Rs 398.4 lakh crore from Rs 403.4 lakh crore in the previous session, translating to investors losing nearly Rs 5 lakh crore in a single session.

Hrishikesh Yedve, AVP Technical and Derivatives Research at Asit C. Mehta Investment Interrmediates Ltd noted: "Domestic benchmark indices opened higher on Tuesday, aided by favorable global clues. However, after some initial jitters, the market saw massive profit booking, with the Volatility Index (India VIX) jumping by about 6%.

“Later in the day, volatility decreased, and the index closed down at 22,302. Technically, the index created a bearish engulfing candle last week, indicating weakness. The index settled below, the low of the bearish engulfing candle, and the 34-Day Exponential Moving Average (DEMA) support, suggesting further pessimism.

“On the downside, the index will find solid support at 22,100-22,000 levels. On the upside, the index will continue to face stiff resistance at 22,800. Overall, we expect the index to consolidate in the 22,000-22,800 range in the short term. In the immediate term, 22,100 and 22,000 will serve as solid support levels, while 22,500 and 22,800 will operate as obstacles to the index.”

The Bank Nifty opened on a bullish note, but due to heavy selling pressure, the index concluded on a negative note at 48,285. Technically, on a weekly basis, the index formed a shooting star candlestick formation near its all-time high, indicating strong resistance near 49,975, he said.

Furthermore, the index broke the previous week's low of 48,342.7. As long as the index remains below 48,340, weakness could extend to 48000-47,700.

In the short term, 48,000 and 47,700 will serve as support points, while 49,000 and 50,000 will operate as resistance, he added.