Mkts would continue to drift lower: Experts

The benchmark indices continued the losses for the fourth consecutive day and closed in red. A decline in advance tax collection numbers and Indo-Pak tensions were two reasons that hammered the markets down in the second half of session.

The 50-share NSE Nifty plunged 59.60 points or 2.04% to 2857.25 and the 30-share BSE Sensex shut shop at 9,328.92, down 239.80 points or 2.51% from the previous close.

Taking stock of the continued fall in the bourses, experts were unanimous in the view that the advance tax numbers and Indo-Pak tensions were the chief reasons behind the fall. The markets, they said, would continue to drift lower.

Reasons for today’s fall

Dipan Mehta, Member of BSE and NSE, feels today’s data on advance tax provided a minor trigger to the markets to correct. “The markets may now be in a range, though I think they will rather test the lower end or the support levels over the next few trading sessions,” he said. Mehta said the fact that news on the possibility of a conflict between India and Pakistan — post the Mumbai attacks — hogging news channels and papers leads to a lack of confidence in investors. “It’s not something the market needs at this point of time. We are [already] trying to fight uncertainty absence of confidence and weak sentiment. Now, if one has to deal with this uncertainty — that there could be a conflict — it saps the energy and completely eradicates any enthusiasm that investors may have on this market,” he said. “It opens up possible theories that the market could trade significantly lower if there is going to be an armed conflict.”

SP Tulsian of sptulsian.com also feels the market fall was more to do with developments on the Indo-Pak issue. “When I was taking the January series’ call, looking at December’s 20–40% rise in all F&O stocks, I was expecting that for the first ten days — till Q3 results start trickling in from January 12 — the markets shouldn’t have any problem,” he said. “So the developments on the political front could be a reason for the market taking a sudden drop in this second half.”

Tax numbers woes

Mehta feels that advance tax numbers are a minor precursor in determining the market trends. “Advance tax numbers provide a bit of an insight — a 22% decline for the last quarter is certainly very disappointing — and although we are expecting horrible quarterly results for the December quarter, you could get surprised on the negative side as well,” he said, adding, “The markets could then correct to those disappointing numbers as well. So it is a likelihood that we may not have seen the worst in the market as yet.”

Road ahead

“If this sell-off assumes a slightly more serious proportion and we consistently go below 2,810, the Nifty could possibly slide initially to around about the first support zone between 2,700-2,750 and if that gets broken, we could possibly see 2,650,” E Mathew, Director of Mathew Easow Fiscal Services, said. “However, when the markets open on Monday, we would hopefully have more clarity on all the saber-rattling [relating to the Indo-Pak tensions], we could see the true levels.”

Mehta too thinks that the earlier support level of 2,800 on the Nifty could easily get broken. “It doesn’t seem likely that the November lows of about 2,500 on the Nifty and 8,500 on the Sensex should be cracked though,” he said. “In last two days, we have been seeing negative flows from the FIIs — that adds to the woes of the market too,” He advises a conservative approach at this point. “You have to take decisions based on the fact that the market — although still in a trading zone — is likely to test and drift towards the support levels and not towards the resistance levels.”