Jan. 10: The continuing negative sentiment over domestic issues ranging from the possible interest rate hike, inflation, political deadlock, lack of decisions on reforms to corruption like the bribe for loans scandal saw the Sensex dip over two per cent on Monday after loosing four per cent last week.
The Sensex has lost 1,337 points since last Monday in 5 trading sessions with the banking sector losing 10 per cent in a week. It closed down 468 points on Monday at 19,224 while the Nifty slipped 141.75 points to close at 5,762.85.
“There are not dearth of concerns like the government postponing policy decisions and added to this is the fact that FIIs have been net sellers in the new year,” said Mr Vivek Mavani of Bric Securities. In the very very short term there could be a further correction, then a pause and then a further downside. “It is not outside the realm of possibility that the Nifty could drop to 5,500,” he said.
What makes this fall very serious is that it clearly India specific, says Pradip Hotchandani of Anagram Securities. It is related primarily to domestic factors. Besides, the continuous recovery signals from the US economy is strengthening the dollar and this is bad for inflows as FIIs would prefer to invest in their own markets.
There was no sector that wasn’t invaded by the bears with major selling seen in rate sensitive capital goods, consumer durable, realty, banking etc. The advance decline ratio was skewed with just 162 stocks closing in the green and 1,161 in the red indicating the tense mood in the markets.
The Nifty closed below its 100 daily moving average (DMA) of 5,939 and may move towards the 200 DMA of 5,596. However it may find median supports at 5,690 and 5,640 which may see an intermediate bounce back due to the oversold region.
“But the overall technical setup is showing a weak trend and weekly charts are suggesting a level around 5,596 as a major support for the Nifty,” said Mr Alex Mathews of Geojit BNP Financial Services Index heavyweights such as L&T, SBI, HDFC Bank, ICICI Bank and Reliance Industries that were butchered largely dragged down the Sensex.
“Panic seems to have gripped Dalal Street early in the New Year with the key Indian stock indices failing to rise in a single day after January 3,” said Mr Amar Ambani of IIFL. Inflation is the biggest danger that the Indian economy faces, which may trigger the fear of further rate hike by Reserve Bank, when it announces its monetary policy on January 25.