Closing Bell: Sensex falls 400 points, Nifty ends below 17,900; IT, metals, realty top losers

Markets are becoming nervous around the 18,000 mark and unable to sustain gains made on Wednesday. Nifty opened positive but wiped out its entire gains to close at day’s low with loss of 126 points. Nifty needs to sustain above 17,700-17,800 zones for the overall setup to remain positive. We expect market to remain in consolidation mode for next few days until the US Fed rate action is over. However intermittent volatility may not be ruled out due to adverse global cues.

Nifty found resistance around 18,100 leading to close in the red for the day. On the daily chart, a dark cloud cover pattern has formed suggesting waning bullishness. However, the short term trend remains positive as the Nifty closed above the falling trend line on the daily chart. On the lower end, support is visible at 17,700, below which the short term trend may become weak. On the higher end, resistance is visible at 17,900/18,100.

Indian equity markets continued their weak trade in late afternoon session on the back of selling in realty and IT stocks. Traders were cautious after Fitch Ratings slashed India’s GDP growth projection for FY23 to 7 per cent, saying the economy is expected to slow against the backdrop of global economy, elevated inflation and high interest rate. Further, weakness also prevailed in the markets as India's merchandise trade deficit in August widened to $27.98 billion from $11.71 billion a year earlier.

In scrip specific, Tamilnad Mercantile Bank remained in focused, as it has debuted at Rs 510.00 on the BSE, down by 15 points or 2.86 percent from its issue price of Rs 525.

On the technical front, the key resistance level for Nifty is 18,000and on the downside 17,750 can act as strong support. Key resistance and support levels for Bank Nifty are 41,800 and 40,800 respectively.

The resilience of the domestic market is fuelled by the strong momentum of the banking sector. The major factors influencing the performance of banking stocks are asset quality, credit growth and FII activity. The recent rally in the market had largely taken into account the improving asset quality, while the market is yet to fully factor in the strong traction expected in credit demand.

FIIs turning net buyers is an additional catalyst supporting the trend. Even after factoring in the current rally, the Nifty Bank index is still attractive trading marginally above the long-term averages. While we continue to have a strong long-term outlook for the banking sector, especially for large private banks, we can't rule out the prospect of short-term profit booking due to the spillover effect of a recession in the global economy.