Weak global cues weigh on indices; 5 factors that weighed on Sensex, Nifty

Dalal Street

Multiple factors such as a sell-off in global markets, hike in crude prices along with exit polls projections weighed on equity markets on Monday.

The indices saw a gap-down opening of about 1.5 percent each, with the Nifty giving up 10,550-mark. The SGX Nifty had hinted at a cut of over 100 points.

At the close of market hours, the Sensex was down 713.53 points or 2.00% at 34959.72, and the Nifty down 205.20 points or 1.92% at 10488.50. The market breadth was negative as 647 shares advanced, against a decline of 1870 shares, while 134 shares were unchanged.

Here are five factors that have impacted the market.

Global sell-off

Equity markets in Asia plummeted in early morning trade following weak trends in the US equity futures market. Investors are said to be worried about US-China trade tensions coming at the forefront again. The arrest of Huawei CFO as well as fresh import tariff rhetoric by the White House are dragging the markets in Asia.

Reuters reported that White House trade adviser Peter Navarro’s has hinted at raising tariff rates on Chinese imports if the two countries could not come to an agreement during the 90-day negotiating period.

Crude price increase

After the much-awaited meeting of Organisation of Petroleum Exporting Countries (OPEC), a supply cut was announced. OPEC and other producers said they would cut supply of 1.2 million barrels per day from January.

International Brent crude oil futures were at $62.21 per barrel at 0218 GMT, up 54 cents, or 0.9 percent, from their last close.

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“Our key conclusion is that oil prices will be well supported around the $70 per barrel level for 2019,” analysts at Bernstein Energy told Reuters on Monday.

Exit polls

With politics taking charge of cues for D-Street, exit polls is a crucial key for the market to react.

Exit polls released by various news organisations and survey agencies for the assembly elections in five states revealed on December 7 mixed results for the Bharatiya Janata Party (BJP) and the Indian National Congress.

The exit poll results were declared minutes after voting concluded in Rajasthan and Telangana.

Macros

Investors could also be reacting to the ballooning current account deficit during the September quarter.

India's current account deficit (CAD) widened to 2.9 percent of the GDP in the second quarter of the fiscal compared to 1.1 percent in the year-ago period, mainly due to a large trade deficit, the RBI said on December 7.

The CAD, or the difference between outflow and inflow of foreign exchange in the country's current account, was $19.1 billion during the quarter ended September 30, 2018.

It increased from $6.9 billion, or 1.1 percent of GDP, in the second quarter of 2017-18. The CAD stood at $15.9 billion (2.4 percent of GDP) in the April-June quarter.

Technical factors

Technical factors are likely to have played on equity markets. Experts suggest investors to watch out for 10,580, a break below which could send the market to 10,540 and 10,490.

“However, a break below 10,490 would result in real panic in the market. Below 10,490, it would eventually fall to minimum 10,200/10,250. On the other side, 10,660 and 10,725 would be hurdles. In case Nifty crosses 10,660 without breaking 10,600, which is unlikely but still if it happens then it would help markets to move towards 10,800/10,850 again,” Shrikant Chouhan, Senior VP (technical research), Kotak Securities said in a statement.

Strategy should be to trade short if Nifty breaks 10,580 at the beginning for the target 10,540.

Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on Moneycontrol are their own, and not that of the website or its management. Moneycontrol advises users to check with certified experts before taking any investment decisions.

(With inputs from agencies)

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