Stock markets trade lower for 5th consecutive session: 4 factors pulling them lower

Stock Matket Today:

India’s stock markets continued their fall for the fifth consecutive session as the benchmark BSE Sensex shed 352.68 points, or 0.6 percent, to 58,113.21, and the Nifty 50 fell 87.30 points, or 0.5 percent, to 17,329.20.

The Sensex touched a low of 57,718.34 on November 23, a drop of 1.3 percent, while the Nifty declined to 17,216.10, dragged lower by IT and banking stocks.

The stock indices had their biggest one-day loss in seven months on November 22, with both the key measures dropping 2 percent. The Sensex has been retreating every day from the November 15 close of 60,718.71.

Factors taking the markets lower:

Weak global markets

Asian stocks were mostly lower, tracking a fall on Wall Street after US President Joe Biden picked Federal Reserve chair Jerome Powell to lead the central bank for a second term, reinforcing expectations that the US will taper its stimulus soon.

US stocks dropped from record highs on November 22 and shares of lenders rallied as two-year US Treasury yields rose after Biden tapped Powell to continue as Federal Reserve chair. Biden nominated Lael Brainard, the other top candidate for the job, as vice chair for a second term.

If the Fed moves too slowly to raise rates, inflation may accelerate further and force it to take more draconian steps later to rein it in, potentially causing a recession. If the Fed hikes rates too quickly, it could choke off hiring and the economic recovery.

Covid resurgence in Europe

Covid cases made a comeback in many European countries, with Austria reimposing a full lockdown and Germany considering following suit. Europe has again become the epicentre of the pandemic, accounting for half of global cases and deaths. A fourth wave of infections has plunged Germany, Europe’s largest economy, into a national emergency, health minister Jens Spahn said, warning that vaccinations alone will not cut case numbers.

Banks, IT under pressure

Bank stocks in India were under pressure with ICICI Bank and IndusInd Bank trading in the red. In the IT space, Infosys, Coforge, Wipro and Tata Consultancy Services were the biggest losers.

Technical Views

Technically, the Nifty broke out of a head-and-shoulders formation, which is a sign of the first meaningful correction. The 100-day moving average of about 17,100 will act as its immediate and strong support level.

The Nifty tried to hold the 17,300-17,250 support zone but was vulnerable to falling again at any pullback, with 17,500 the immediate hurdle and 17,600 the critical hurdle, said Santosh Meena, head of research at Swastika Investmart.

The Nifty once again approached the 17,200 level and has bounced back from there. This is a good support for the index and if there is any turn on the upside, it has to happen from here. If this level is broken, the slide may extend to 16,900.

On the upside, there are multiple resistance levels and the trend for the short term remains bearish. Hence, any pullback should be looked at as an opportunity to go short, said Manish Hathiramani, proprietary index trader and technical analyst at Deen Dayal Investments.