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Last Updated : Jun 08, 2019 09:59 AM IST | Source: Moneycontrol.com

Nifty fails to sustain above 11,900 levels; 20 stocks fell 10-30% in BSE500 index

The broader market underperformed benchmark indices by a wide margin for the week that ended on June 7.

Kshitij Anand @kshanand
 
 
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It has been a volatile truncated week for India markets as Nifty50, which had jumped to a record high of 12,103.05 on June 3, failed to even hold on to 11,900 levels towards the close of the week.

Benchmark indices closed with minor gains. But, for the week that ended on June 7, both Sensex and Nifty snapped their three-week winning streak and closed with losses of 0.25 percent and 0.44 percent respectively.

The broader market underperformed benchmark indices by a wide margin for the week that ended on June 7. The S&P BSE Midcap index slipped 1.26 percent, and the S&P BSE Smallcap index was down 1.4 percent in the same period.

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As many as 20 stocks in the S&P BSE 500 index fell 10-30 percent in just four trading sessions, which include names like Reliance Communications, Radico Khaitan, Edelweiss Financial Services, Kwality, Jaiprakash Associates, Jet Airways, Reliance Power, Manpasand Beverages, Reliance Infra, and Eros International Media.

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At a time when US markets rose by about 4 percent for the week, the Indian market witnessed string selling pressure largely on concerns around economic growth which touched a five-year low, ongoing liquidity concerns in NBFC sector, muted earnings from India Inc. and high valuations are among few factors which weighed on sentiment.

Despite a rate-cut and a change in stance from the Reserve Bank of India (RBI), the Street was expecting some strong measure for the NBFC sector which had been facing a liquidity crisis.

“Given DHFL’s default on a portion of interest payments and the difficulty in rolling over the commercial papers gives a glimpse of what happened in the US a decade ago with the subprime crises, this can be dubbed as the Indian version of subprime crises is the question the Street is grappling with,” Jimeet Modi, Founder & CEO, SAMCO Securities & StockNote told Moneycontrol.

The malaise was caused due to the rather illiquid nature of assets which the lenders had agreed to finance. But, since lenders are no longer able to rollover their bonds/commercial papers, they have no option but to sell the mortgaged assets which have become quite difficult in the current market.

“This temporary funding gap mismatch, unless the RBI proactively helps them, can snowball into a bigger-crises of confidence that can lead equity markets to roll down further,” explains Modi.

 

Technical Outlook

The Nifty50 witnessed profit booking from the all-time high 12,100 after the RBI monetary policy as it snapped its three weeks of a winning streak to close at 11,870 levels.

The index formed a small bear candle, and there are higher chances of consolidation in a broad range of 11,600-12,000 levels.

“The price action formed a small bear candle with a long upper shadow signalling profit booking at higher levels post last three-week sharp up move (9 percent). We believe index would undergo healthy consolidation in the broad range of 11,600 – 12,000 and form a higher base for the next leg of the up move,” Dharmesh Shah, Head – Technical, ICICI Direct told Moneycontrol.

“The price structure in the Nifty remains firmly positive. We do not foresee the index breaching the exit poll session low (11,591), and any dips should be used as a buying opportunity for up move towards 12,000 levels,” he said.

Disclaimer: The views and investment tips expressed by investment expert on Moneycontrol.com are his own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.

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First Published on Jun 8, 2019 09:59 am
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