Bears tighten grip as stocks slump: 5 factors triggering the selloff

Bears appeared to take over the stock markets in the morning session on November 11 with the benchmark indices trading at the day’s lows amid weak global cues.

The benchmark S&P BSE Sensex had fallen 534.92 points, or 0.89 percent, to 59,817.90, while the Nifty 50 on the National Stock Exchange tumbled 171.90 points, or 0.95 percent, to 17,845.30 at 11:20 am.

“The Indian benchmarks have a gap-down opening today amid weak global cues,” said Likhita Chepa, senior research analyst at Capitalvia Global Research. “Investors may take encouragement with 9.5 percent economic growth of the country.”

Reserve Bank of India governor Shaktikanta Das said November 10 he was confident that India’s GDP would grow by 9.5 percent in this financial year because all growth impulses were very strong and fast-moving indicators were stronger.

Technical indicators also support positivity in the market. The level of 17,700-17,800 may act as an immediate support and if it is sustained, the market may trade in the 17,700-18,000 range, Chepa said.

Five factors that weighed on sentiment today:

Inflation woes

Inflation fears pressured the stock markets after data overnight showed US consumer prices surged last month at the fastest pace since 1990, boosting the case for faster Federal Reserve policy tightening.

US consumer prices rose 6.2 percent in October, with gasoline leading a broad-based increase. That added to signs that inflation could stay uncomfortably high well into 2022 amid snarled global supply chains.

Inflationary pressures are building up in the labour market, with data showing the number of Americans filing claims for unemployment benefits fell to a 20-month low.

The benchmark 10-year Treasury yields jumped the most in seven weeks to as high as 1.592 percent on November 10.

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Evergrande concerns

Cash-strapped China Evergrande Group, facing a deadline for coupon payments on November 10, may have made those payments, according to a report by Bloomberg, which said that customers of international clearing firm Clearstream had received overdue payments on three US dollar bonds.

A failure to pay would have resulted in a formal default by the property giant and triggered cross-default provisions for other Evergrande dollar bonds, exacerbating a debt crisis looming over the world’s second-largest economy.

Dollar at 2021 high

The dollar hit the highest level in 2021 against the sterling and the euro on November 11 after the US inflation reading spurred speculation of rate hikes. The dollar’s rise also affected emerging market currencies. The MSCI’s emerging markets currencies index recorded its steepest decline in two months.

Banks, IT, realty stocks weigh

Indian stocks were dragged lower largely by banks and IT and realty companies. The Bank Nifty was down almost 1 percent, while the metal and realty indices shed 1-2 percent each. Barring the capital goods index, all other sectors traded in the red, with the midcap and smallcap indices down half a percent each.

Technical view

Manish Hathiramani, proprietary index trader and technical analyst at Deen Dayal Investments, said the markets are unable to decide the way forward. While the overall trend is positive, the short-term vision seems undecided.

Above 18,100, the outlook is positive, while below 17,700-17,800 it looks bearish. The markets are caught in a range and a breakout or a breakdown is needed to witness a meaningful direction.

According to Way2Wealth Research, following weak global cues, domestic markets started the session on November 10 with a gap down and after making the low of 17,915, the Nifty recovered and closed at 18,017 with a minor loss.

On the daily chart, the Nifty is currently moving in a small rising channel with support coming in at around 17,950 for the day.

A crucial support of the head & shoulder pattern is placed at about 17,650. On the higher side, 18,100 and then 18,250 would be the immediate resistance levels.