Dalal Street bears take revenge as Sensex slumps 1,500 points in 2 days

Indian stock markets fell sharply for second straight session after the recent rally that took Nifty closer to 18,000 mark. The Nifty50 index fell over 1.5% to settle below 17,500 while Sensex fell over 850 points, dragged by tech and bank stocks. Both the indices had slumped over 1% on Friday. Global markets were also weak as the dollar extended its climb amid angst over global growth.

According to IFA Global, global risk sentiment has taken a hit on inflation concerns in UK and Europe resurfacing, housing crisis, COVID curbs and power shortages in China and recent hawkish comments from Fed members.

“Market is delicately poised with higher downward risk. The sustained FII buying is positive. But FIIs are unlikely to buy aggressively in the present context of rising dollar. The dollar index is back above 108 and the US 10-year bond yield is at 2.99%. This is negative for capital flows to emerging markets,” said VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services.

“India’s favorable leading indicators in the context of global growth slowdown have the potential to attract more FII flows but the rising dollar and bond yields are strong headwinds. Investors have to exercise caution. Medium to long-term investors can buy high quality banks on declines,” he added.

Prashanth Tapse – Research Analyst, Senior VP (Research), Mehta Equities Ltd, said Nifty could wobble or waver from here on as the big debate heats up on whether the Fed will scale back to 50 basis points from consecutive 75-basis-point hikes in September. Traders will be focusing on comments by Fed Chair Jerome Powell when he addresses an annual global gathering of central bankers at Jackson Hole, Wyoming, on Friday.

The recent rally in Indian markets had taken Nifty from 15,000 levels in June to around 18,000 without any significant correction during the uptrend.

 

Nifty technical outlook

Anand James – Chief Market Strategist at Geojit Financial Services, said: “A shooting star in weekly, and a bearish engulfing in daily chart hints that the 18100-18200 trajectory has probably come to an end. Traders will stare at the prospects of 17000 again, for the August expiry, but will fancy slim chances of recovery, should Monday volatility fail to penetrate 17600 and manage to pull back above 17720 which meets the internal trendline. Inability to do so will call for 17300 initially.”

Ruchit Jain, Lead Research, 5paisa.com, said, “Our markets have seen a sharp up move in the last one and a half month wherein the Nifty has rallied from 15200 to almost 18000 without any meaningful correction. The momentum readings entered the overbought zone, but the index crept higher within the overbought territory in last few days. However, the readings had reached the inflection point where a time-wise or a price-wise correction was much required and the index started the same in Friday’s session. On the lower side, we expect the market to correct towards 17550 first where support is placed on the hourly charts, while a break below the same could then lead to further correction towards the daily chart support at 17330.”

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