Indian equity markets began Samvat 2074 on a weak note with the benchmark indices falling 0.6 per cent during Muhurat trading on Oct 19, tracking weak global cues and selling across banks, healthcare, auto and tech stocks.
The BSE Sensex closed 194 points or 0.6 per cent lower at 32,389.96 points and the NSE Nifty 50 index declined 64 points or 0.6 per cent to settle at 10,146.55 points.
Equity markets conduct special one hour Muhurat trading to ring in the new Samvat on Lakshmi Pujan day every Diwali.
This year, high valuations, with the indices trading at near record level also weighed on investors minds.
The disruptions caused by demonetisation and the initial issues post the rollout of GST have concerned market men although in the long-term most brokerages still remain bullish.
"With a broader view, certainly yes, the bull run is likely to continue, but if we have to consider slightly smaller picture, then we are still a bit sceptical about it," said Sameet Chavan, chief analyst at Angel Broking.
So far this calendar year, the Sensex has surged more than 21 per cent while the Nifty has jumped almost 24 per cent.
On Oct 19, there were only five gainers on the 30-share Sensex. Bharti Airtel was the biggest gainer, rising 2 per cent. Even as the telecom sector has been under pressure, Airtel has hit a two-year high in recent days following two key acquisitions this year - Telenor and Tata Teleservices - strengthening its leadership position.
Banks led the losers; while ICICI Bank and Kotak Mahindra Bank were down about 2 per cent, HDFC Bank, State Bank of India and Axis Bank fell 1 per cent.
Adani Ports, Tata Motors, Coal India, Wipro, Maruti Suzuki and Bajaj Auto were among the other losers.
Strong inflows by domestic investors into mutual funds have been key to the stellar rise in Indian equities, although foreign institutional investors have been sellers since August.
While domestic flows are expected to cushion any fall in the markets, analysts say a recovery in corporate earnings across sectors will be keenly watched out for.
"We are getting to what we call the day of reckoning. I think now the base effect of demonetisation is kicking in, GST has been absorbed by the market. So, in the next couple of quarters if the the earnings don't improve, it could be high-noon for the markets," said Ramesh Damani, member, BSE, speaking on a TV channel.
Broking firm Axis Direct says in the near-term, global geo-political developments like the tensions between US and North Korea and the withdrawal of stimulus from US Federal Reserve and other central banks may impact Indian equities.
But, India remains largely domestic consumption-led, and the rural economy, which supports 70 per cent of the population should get a boost from another year of good monsoon, it added.
The brokerage remains bullish on select auto components and packaging stocks, while it also expects media stocks to get a boost as political spending will pick up in the wake of several state elections in 2018 and the general elections in 2019.
