Closing Bell: Nifty ends below 14K, Sensex drops 938 pts; metal, financials underperform

Taking Stock | Nifty Ends Below 14K, Sensex Plunges Over 900 Pts As Bears Continue To Dominate

Broader markets outperformed the main indices with BSE Midcap and Smallcap indices falling 1.3 percent and 0.5 percent respectively.... Read More

The market opened lower and closed at the lowest point of the day on the back of consistent weakness in global markets as well as selling from FIIs in the cash segment. We are of the view that hot money is exiting ahead of the major event of the Union Budget. The decline is steeper than expectations from traders and reversal is missing. We are approaching monthly expiry on Thursday and on a monthly basis, the market has erased all the gains despite the Nifty/Sensex moved to 14750/50185.

Certainly, it is negative for the market in the medium term (1 to 3 weeks), however, in the short term, we could see relief rally from 14000/13900 (47500/47200) levels. The strategy should be to buy at current levels and keep a final stop loss at 13700/46500 (50 DAYs SMA) for the same.

The downside in USDINR spot is getting cushioned by IMF’s impressive projection about India’s 2021 growth. The downtrend will continue as long as Fed remains accommodative, but any update from Powell about future tapering or delay in US fiscal stimulus rollout will lead to a reversal in USDINR spot. A fall below 72.75 will push price towards 72.50 zone, however a reversal may take spot towards 73.50 zone.

The Nifty-50 broke the 14,000 level today even though other Asian and European markets are marginally down. The fall could be due to profit booking by FIIs and other participants in the F&O segment as tomorrow is the monthly expiry. Some unwinding of positions is visible before the budget event. Volatility is normally higher on the last two days of monthly expiry but this time the fall with higher volatility show cautiousness amongst market participants before the budget event.

Earnings are coming out better than expected but profit booking is seen in most companies that have declared results so far barring a few cases. If Nifty-50 sustains below 14,000 for the next two days that the probability of it testing 13,000 goes up. We need to wait for tomorrow’s expiry closing to test whether Nifty-50 sustain the 14,000 mark.

Markets slipped further lower on Wednesday as selling pressure continued across the board. After a weak start, the benchmark gradually drifted lower as the day progressed and settled around the day’s low. Several factors like negative foreign flows combined with no so encouraging earnings announcements dented the sentiment. Besides, caution ahead of the Union Budget and scheduled derivatives expiry also added to the pressure. On the benchmark front, the Nifty ended with a cut of nearly 2% to settle at 13,967.5 levels. In line with the benchmark, all the other indices, barring FMCG, ended with losses wherein metal, realty and auto were the top losers.

We’re are not surprised with the recent fall and expect Nifty to test 13,700. However, it’s a healthy correction before the event and investors should use it to accumulate fundamentally sound counters on dips. Traders, on the other hand, should maintain extra caution due to the expected rise in volatility ahead. We thus suggest trading through options or taking selective trades in cash segment.

Nifty has broken a critical level of 14,000; this coupled with negative market health is expected to result in further selling pressure. Next support for Nifty is seen at 13,500-13,700 off levels. We believe sub 14,000 level is a good zone to accumulate for the medium to long term in terms of risk-reward. Expect volatility to remain high and would be watchful for signs of reversal before taking an aggressive stance.

Markets witnessed a 2% cut in Indices today even as the IMF put out an impressive 11.5% growth for India in 2021, the highest for any major economy globally. Autos, Metals & Financials bore the brunt of selling as we saw unwinding ahead of the Union Budget. Absence of FII buying this week too added to the nervousness in Wednesday's afternoon trade.

It is well-known that a fall in FIIs inflows will be the biggest risk to the liquidity-driven rally. Indian bourses mirrored mixed sentiment from global peers with a downward rally owing to consecutive days of FII selling. Barring defensive FMCG segment, all sectors traded in the red zone with banking and pharma stocks being the worst hit. The global markets were mixed today ahead of the US Fed meeting amid uncertainty over the US stimulus. We should expect higher volatility in the coming days' given pre-budget event risk.

Rupee kept its uptrend intact as dollar index pressured kept on due to FED's expected dovish stance on the policy to be announced this week. Rupee did not appreciate to a big extent due to risky equity markets faced a lot of pressure in recent days which kept rupee appreciation at check near 72.80. Going ahead 73.00 mark will keep acting at strong hurdle for USDINR pair and 72.60 as supporting aid.

The market witnessed a strong downward trend and a decisive breakdown below the support level around the Nifty 50 Index level of 14,000. While a recovery above 14,000 is the key to change the short-term bearish outlook. Market is sustaining below this level to gain downside momentum and open the gate for a movement until 13,670.

We have observed the momentum indicators like RSI, MACD to turn negative and market breadth to deteriorate significantly, further strengthening the view of a short-term bearish outlook.

Indian rupee erased most of the intraday gains andendednear the day'slowlevel at 72.92per dollar, amidprofit bookingsawin the domestic equity market.

It opened flat at 72.94 per dollar against Monday's close of 72.95 and traded between 72.78-72.94.

Benchmark indices ended in the red for the fourth consecutive session on January 27 on the back selling seen in the bank, auto, metal and pharma stocks.

At close, the Sensex was down 937.66 points or 1.94% at 47,409.93, and the Nifty was down 271.40 points or 1.91% at 13,967.50. About 1053 shares have advanced, 1809 shares declined, and 141 shares are unchanged.

Tata Motors, Axis Bank, Tata Steel, GAIL and Titan Company were among major losers on the Nifty, while gainers were Tech Mahindra, SBI Life Insurance, Wipro, ITC and Power Grid Corp.

Except FMCG, all other sectoral indices ended in the red. BSE Midcap and Smallcap indices shed 0.5-1.3 percent.

The market valuations have become stretched and most of the positives are factored in the price. The upcoming budget will be a tight rope walk for the government and negative surprises of higher taxation, that could impact consumption, which cannot be ruled out. Needless to say, the market has become jittery ahead of this major event. Investors should build for a defensive portfolio and also hold cash, as there will be good buying opportunities in the future.