Sensex, Nifty fall nearly 1% on weak global cues; analysts expect selling to intensify

The US inflation print for January came in higher than market expectations.

Benchmark indices BSE Sensex and NSE Nifty 50 fell on February 14, following weakness in overseas markets due to hotter-than-expected US inflation print. Analysts say selling pressure could intensify from here on, and Nifty could fall further towards 21,350-21,200 level, amid firming bond yields and dollar rates.

Sensex and Nifty declined 0.8 percent each to 70,951 and 21,563, respectively, in February 14 morning deals. Broader markets, too, bled as Nifty Midcap 100 and Nifty Smallcap 100 indices slipped up to 1 percent market. India VIX, which measures market volatility, jumped over 1 percent to trade above 16 level.

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To this, Hemen Kapadia, Senior Vice-President of Equity Research at KRChoksey Securities said that as long as India VIX hovers in the range of 15-16 percent, markets will continue to behave in a bearish manner.

"If we want markets to go up, we need India VIX to be around sub-13 level. Our markets are stretched, tired, and we need an excuse for correction. The US inflation print is our excuse as bond yields and dollar take a toll. But, we believe that this correction will make overall markets healthy," he told Moneycontrol.

On the charts, Deven Meheta, Research Analyst at Choice Broking chalked Nifty to find a support at 21,550 followed by 21,500 and 21,400. "On the higher side, 21,750 can be an immediate resistance, followed by 21,800 and 21,900," he said.

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IT stocks suffer as US dollar strengthens

Barring Nifty Media and Auto indices that eked out slim gains, all other sectors drowned in the sea of red. Nifty IT index emerged to be the worst sectoral performer, declining 2 percent within first hour of trade. This comes on the back of rising dollar rates overnight.

The US dollar index, greenback that measures basket of six other currencies, advanced near three-month highs to trade above 104 level on February 13 after hot US inflation print moved rate cuts possibility to June from March.

When US dollar strengthens against rupee, most IT stocks suffer as a significant portion of their revenue from exports to US gets impacted.

HDFC Bank stock weighs down Bank Nifty index

Apart from that, Bank Nifty index slipped by a percent on February 14 early deals led by losses in HDFC Bank, Bank of Baroda, and Bandhan Bank.

The charts of Bank Nifty indicate that it may get support at 45,000, followed by 44,800 and 44,600, said Meheta of Choice Broking. "If the index advances, 45,500 would be the initial key resistance, followed by 45,600 and 45,750," he added.

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Rate cuts prospect shifts to July from March; dollar, yields firm up

Globally, hotter-than-expected US inflation print triggered selloff in US markets overnight. The Dow Jones experienced a decline of 1.3 percent, marking its worst performance since March 2023, while the S&P 500 and the NASDAQ Composite indices dropped by up to 1.8 percent.

The 10-year US treasury yield also spiked by 15 basis points (bps) overnight to 4.3 percent, while the yield on 2-year treasury note climbed by 19 bps to 4.6 percent.

In January, the consumer price index increased by 0.3 percent on a monthly basis and by 3.1 percent year-on-year, surpassing Street estimates. These figures provide the Fed with justification to postpone interest rate cuts beyond the market's expectations, with traders adjusting their expectations for rate cuts to July from June.

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