In the forthcoming sessions, if Nifty doesn’t stabilise around its 200-days EMA of 10,785 levels, traders should prepare themselves to see the index heading towards 10,557 levels, said Mazhar Mohammad of Chartviewindia.in.
The S&P BSE Sensex plunged by over 800 points on Thursday while the Nifty50 also broke below its 200-days simple moving average and closed a tad below 10,600.
Sectorally, BSE Energy index, oil and gas, IT, finance, and auto stocks saw selling pressure while capital goods and metals bucked the trend and were trading in positive terrain.
Crude oil prices at multi-year high, falling rupee are keeping bulls at bay for D-Street. Despite government’s decisive move in the case of IL&FS, the market is seeing relentless pressure and deep cuts are seen in small & midcaps.
“The precarious positioning of international macros simply not letting the pressure- off the market. The last-man-standing industries such as large-cap autos and IT have also started melting, almost leaving no place for markets to hide,” Jagannadham Thunuguntla, Sr. VP and Head of Research (Wealth), Centrum Broking Limited told Moneycontrol.
“Markets are eagerly awaiting decisive relief measures from the government to provide confidence to Indian rupee, which is making fresh all-time lows almost on daily basis,” he said.
Here is a list of top four factors which are weighing on Indian market:
Dollar scales 11-month peak & firm bond yields:
Higher dollar will hurt rupee which hit a fresh record low in the previous session. The dollar climbed an 11-month top on the yen on Thursday as stunningly strong US economic data drove Treasury yields to their highest since mid-2011.
Higher US yields are anything but favourable for emerging markets, however, as they tend to draw away much-needed foreign funds while pressuring local currencies, said a Reuters report.
Federal Reserve Chairman Jerome Powell declared the economic outlook was “remarkably positive” and said rates might rise above “neutral”, currently anywhere from 2.5 to 3 percent, added the report. As a result, a Fed hike in December is now put at an 8 in 10 chance, while investors lifted expectations for how high rates may eventually go.
Brent hits new four-year high:
Brent crude rose nearly 2 percent after hitting a four-year high on Wednesday as the market focused on upcoming US sanctions on Iran while shrugging off the year’s largest weekly build in US crude stockpiles and reports of higher Saudi Arabian and Russian production, said a Reuters report.
Brent crude rose $1.49, or 1.8 percent, to settle at $86.29 a barrel, after hitting $86.74, its highest since Oct. 30, 2014. US crude settled $1.18, or 1.6 percent, higher at $76.41 a barrel, after touching a session high of $76.90.
"In the current market environment, crude oil in triple digits is a possibility. If this were to happen, there would be a further deterioration in the CAD, inflation and growth outlook and this will be a downside risk to equity markets in the short term," Vivek Ranjan Misra, Head of Fundamental Research, Karvy Stock Broking told Moneycontrol.
"Looking out further over a year, we believe the positive environment for growth and corporate earnings will support markets and equities will be higher over the next twelve months," he said.
Fears of a rate hike by RBI on Friday:
The Reserve Bank of India (RBI) is likely to raise the policy repo rate by 25 bps from 6.5 percent to 6.75 percent in its upcoming monetary policy review on October 5.
The central bank will have to balance multiple objectives in the current meeting. While inflation has been decelerating in the past two months, some upside risks still abound, suggest experts.
"The MPC meeting is happening at a time when a tale of 2 Cs is unfolding – viz crude oil prices and currency. The rupee has depreciated almost 7 percent since last policy while crude oil prices are up by over 17 percent,” Lakshmi Iyer, CIO (Debt) & Head of Products, Kotak Mahindra Asset Management Company told Moneycontrol.
“This clearly is a double whammy for and net oil importer nation like India. While the H1 FY2019 CPI is likely to be within RBI target range, the key is to see how much H2 FY 19 could play spoil sport amid rising crude prices,” she said.
Iyer further added that rising US rates and the intent to effect many more rate hikes would also be a pointer for our policy makers. Markets seem to already have discounted a rate hike at the current prices and the tone of the policy could be a key determinant for yield movements.
Technical Factors: 200-DMA remain a key support
The Nifty50 slipped below its crucial support placed at 10,800 levels in morning trade and the next big support is placed near its 200-DMA or 10,777 levels. A close below this level could mean that plenty of stop losses will get triggered and take the index towards 10,577 levels.
“In the forthcoming sessions, if Nifty50 doesn’t stabilise around its 200-days EMA of 10,785 levels, traders &investors should prepare themselves to see the index heading towards 10557 levels,” Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory, Chartviewindia.in told Moneycontrol.“On the upsides bulls will able to revive their chances of coming back provided they manage a close above psychologically important 11000 levels. Till then stakes shall remain in favour of bears with chances of Nifty heading towards 10555 levels,” he said.