Benchmark equity indices have turned negative for the calendar year and moved below their 50-day moving average on February 7.
The Nifty 50 and BSE-Sensex also moved below the highs made by them on the day of the announcement of the Union Budget for 2022-23 last week, reflecting the weakening of sentiment among investors.
In the derivatives segment, traders added short positions in the February contract of the index as open interest jumped more than 7 percent. The Nifty 50 index was down 304 points, or 1.7 percent, at 17,212.4, while the BSE-Sensex was at 57,536, down 1.9 percent or 1,108 points.
“It (Nifty 50) would now require a break beyond 17,580 to instill confidence in upsides, but we will watch the 17420-380 region for early emergence of bargain hunting,” said Anand James, chief market strategist at Geojit Financial Services.
Let’s take a look at the factors ailing the sentiment on Dalal Street:
1 Crude oil nears $100-mark
The rally in global crude oil prices showed no signs of abating after Brent nearly touched the $94 per barrel mark in Asian trading earlier today. The commodity has risen more than 14 percent in the past month and is expected to continue its climb towards the $100 mark in the coming weeks. Surging crude oil prices are negative for the Indian economy as it further harms the fragile consumer demand currently visible and pressures the Reserve Bank of India to tighten monetary policy at a faster click to contain inflationary pressures.
2 Five US rate hikes on the table
The non-farm payrolls data in the US on Friday put to bed any hopes among investors that US Federal Reserve may go easy on interest rate hikes this year. The US added more than 467,000 jobs in December, a month hit by the spread of the Omicron variant, which was considerably higher than what economists had penciled in. The robust jobs market data led traders to raise their bets on the US Fed raising interest rates by five times this year including a possible 50 basis points hike in the March monetary policy meeting.
3 Unceasing FII selling
Much like the rally in global crude oil prices, the selling pressure from foreign portfolio investors has been unceasing. Foreign investors have net sold domestic stocks worth close to Rs 37,000 crore so far in 2022 as they continue to flock to other emerging markets presenting better valuations multiples. The expectations of aggressive rate hikes by the US has forced FPIs to pull out capital from the Indian stock market given is expensive valuations compared to other emerging market economies and some developed markets.
4 Tech sell-off hamstrings market leader
The rally in the domestic stock market over the past year was largely driven by the poster child of this bull market – information technology companies. The sector has lost considerable momentum in 2022 with the Nifty IT index more than 10 percent below its recent high. The sell-off in global technology stocks has had a rub-off effect on the space because of selling from foreign investors. Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
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