Closing Bell: Indices end 2% lower, Sensex cracks 800 pts; pharma, metals top losers

Markets witnessed a sharp correction today, on the back of geopolitical tensions between China & India. Further, ahead of the Q1 GDP numbers and implementation of the new margin norms kicking in from tomorrow, profit booking was witnessed. It was a sell-off across the board with Declines outnumbering Advances by more than 3:1. Major indices such as the Nifty, corrected sharply by 2.23% to end the day at 11,387 whereas BankNifty corrected by 3.14% to end the session at 23754. Overall, today’s high now should act as a key resistance going forward with support for Nifty seen around the 11200-11300 zone.

Taking Stock: Cross-border tensions spoil the party; Sensex closes below 39K

Sectorally, selling pressure was seen in realty, healthcare, utilities, power, and capital goods space

: After showing one way upside momentum for the last six sessions, Nifty tumbled sharply from the highs on Monday and witnessed a massive profit booking from the highs. Nifty opened on a sharp upside note, made a new swing high of 11794 in the early part of Monday's session. Sharp profit booking encountered from the highs and the market declined sharply and closed near the day's low. A long bear candle was formed, that has engulfed the high low range of the last six sessions. This pattern could be considered as a bearish engulfing pattern. Hence, formation of such pattern at the new swing highs and near the hurdle could be considered as an important reversal pattern. We need follow through weakness in the subsequent session to confirm the reversal pattern.

The minor degree of higher highs and lows observed on the daily chart. Previously, any downward correction from the highs have consumed 1-2 sessions of weakness and Nifty rebounded sharply from the lows. But it seems such pattern is unlikely to repeat, as we predict this bearish engulfing to be an important reversal pattern. Hence, the swing high of 11794 could be a crucial overhead resistance. The upside breakout of intermediate resistance of 11450-11500 as per change in polarity (trend line resistance as per weekly/monthly chart) has turned out to be a false downside breakout as of now. This is negative indication.

The short term trend of Nifty seems to have reversed. Follow-through weakness is expected to confirm this reversal pattern. We expect sell on rise opportunity on any upside bounce back attempt around 11450-11500 levels. One may expect further weakness in the short term and the next lower levels to be watched at 11100-11000.

#Breaking | April-July fiscal deficit at Rs 8.21 lk cr Vs Rs 5.48 lk cr (YoY)#fiscaldeficit #revenue #spending #deficit pic.twitter.com/yiyKLx7QZH

— CNBC-TV18 (@CNBCTV18Live) August 31, 2020

: India’s benchmark indices fell the most in over a month on news of tension between India and China on Ladakh border and ahead of the new margining system to be rolled out on Sept 01. At close the Nifty fell 284.40 points or 2.44 percent at 11363.20. The change in margin system and securities pledge-repledging could undoubtedly bring disruptions in volumes of daily trading as there is insufficient preparation and validation by the participants in this system - viz Exchanges, Depositories, Depository participants, Clearing corp, Brokers and clients.

We could witness further polarization of stocks in the markets for some time with the top 200-300 stocks seeing the most depth and liquidity. The securities currently pledged with the brokers need to undergo the new process, which so far is not smooth going by the runs conducted so far. Hence large traders are unsure as to whether they will have limits to trade on Sept 01 which may lead to volume drop in both Cash and F&O segments that may last a few days/weeks. The short term trend of the markets seems to have turned down.

Weak US dollar likely to support metal prices, stay cautious on gold: Kotak Securities

Gold has bounced back sharply from recent lows indicating buying interest in the market, however, some caution is required as volatility in US dollar index may subside with the market's focus shifting…

: The new pledge mechanism will bring much-needed transparency and will prevent brokerages from misusing clients' securities. As a result of SEBI's refusal to extend the deadline, traditional brokerages with legacy systems will face huge operational challenges that can cause chaos and unintended consequences in the near future.

#MarketsWithMC | Closing Bell 🔔Indices end 2% lower, Sensex cracks 800 pts; pharma, metals top losers. #Stocks #StockMarket #StocksToWatch | LIVE: https://t.co/8j2n5XavLG pic.twitter.com/5kjHLB6cZY

— moneycontrol (@moneycontrolcom) August 31, 2020

: Sensex ended lower by 839.02 points or 2.13 percent at 38628.29, and the Nifty cracked 284.40 points or 2.44 percent at 11363.20 amid India-China border tension. Sun Pharma, SBI, Bajaj Finserv and Najaj Finance are the top losers while Bharti Airtel, Reliance Industries and IndusInd Bank are the most active stocks.

Among the sectors, metals, pharma and the PSU Bank index tumbled over 4 percent while the midcap index shed 3 percent.

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Sectorally, selling pressure was seen in healthcare, realty, capital goods, banks, and capital goods sectors.