Bears were in a tight grip on Dalal Street in the past seven trading sessions. During this time, BSE Sensex has crashed from around 61,319 to 58,900 levels, logging around 2,500 points dip or 4 per cent loss in this time. The broader Nifty50, which also saw 7 days of non-stop selling, stooped below the Budget day low of 17,353.40.
Fear gauge index India VIX shot up another 5 per cent as selling was seen across sectors. Sectoral indices of IT, metals, and media lost between 2-4 per cent each.
Santosh Meena, Head of Research, Swastika Investmart Ltd., said: “Nifty has slipped below its key support of 17350, which is its 200-DMA as well as the budget day’s low. However, we should wait for a close because if this breakdown is false, we can expect a short covering move. There is a sharp divergence between the Nifty and Banknifty today, with Banknifty showing decent strength while the Nifty is under pressure. BankNifty is a leading indicator in general, and the market is oversold based on FIIs’ short exposure and PCR, so we should wait for the day’s close. However, if Nifty does not recover, then 17130 is the next target level.”
US Fed Meeting in Focus
Speaking on the reason for dip in Sensex and other benchmark indices, Anuj Gupta, Vice President — Research at IIFL Securities said, “Sensex and other key benchmark indices are falling for the last seven sessions because of the rising US dollar rate. In last seven sessions, US Dollar Index has risen above 105 levels and it may go up to 107 levels in near term. Major reason for US dollar gaining strength is rising US inflation concern after stronger than expected US economic date in recent weeks. This has raised concerns of US Fed officials and they are dropping hint to raise US Fed interest rates by 25 bps in upcoming three US Fed meetings.”
Global Markets
Indian markets are reflecting bearish sentiments dominating global markets. The Dow Jones fell 3% last week in its fourth straight weekly decline. Asian markets were under pressure this morning, with Nikkei down 0.2%, Hang Seng lost 0.8% and Australia’s S&P/ASX 200 shed 1.3%.
FII selling
Foreign institutional investors have dumped Indian stocks worth over Rs 31,000 crore so far in the calendar year 2023. F&O data showed that FII net shorts in index futures increased again above 1 lakh contracts.
“Last week, bond yields in the US continued to rise in anticipation of the Fed turning more hawkish in the context of the slow disinflation in the U S. Rising rates in the US might lead to more capital outflows from emerging markets. South Korea and Taiwan witne ..
Q3 Earnings
The December quarter earnings season failed to provide any positive trigger to support valuations. Of the Nifty50 companies, 50% beat PAT estimates, while 40% missed estimates, Sharekhan said. “Margin pressure continued for sectors such as cement, metals, healthcare, and oil and gas. Excluding BFSI, EBITDA margins of Nifty 50 companies declined by 184 bps YoY due to reduction in gross margin amid higher input cost,” it said.
Market outlook
On asking how the market may move in the ongoing year, he said that the domestic equity market may stay volatile in the short term. However, Bembalkar is positive about India’s structural growth story.
“Our Government is keen to make India a global manufacturing hub and is making deliberate efforts to stimulate manufacturing activity within the nation. India’s private consumption is on a structural growth path. In fact, as per International Monetary Fund (IMF) data, India is one of the fastest-growing large economies. Hence, we find the risk-reward trade-off favourable for investors with long-term horizon (beyond 3 years),” he said.
On a year-to-date basis, the NSE Nifty index declined 3.50 per cent to 17465.80 on February 24, 2023 from 18105.30 on December 30 last year. On the other hand, broader index Nifty 500 plunged 5.3 per cent to 14,630.45 during the same period.
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