Closing Bell: Nifty ends below 17,650, Sensex falls 555 pts; metal, PSU banks worst hit

Taking Stock: Sensex Tumbles 555 Points, Nifty Below 17,650 On Weak Global Cues; Metals Lose Shine

On the BSE, the metal index shed 3 percent, while auto, healthcare, IT and realty indices fell over a percent each... Read More

Markets witnessed profit taking on the back of weak Asian market cues. After the 17,775 support breakdown, selling intensified in Nifty stocks. On daily charts, the index has formed a long bearish candle which indicates further weakness from the current levels. However, as long as the index is trading above the 20 day SMA, the uptrend texture is intact.

We are of the view that the market has completed one leg of correction and now the 20 day SMA and 17600 would act as a sacrosanct support zone.

For day traders, 17750-17815 would be the intraday resistance level. On the flip side, 17600-17540 would be the key support area. The texture of the market is volatile hence quick intraday correction from the resistance levels is not ruled out.

A number of macro indicators are close to technically critical levels – potential upside breakouts in Dollar index, Crude and Developed Market bond yields could get confirmed this week. The global backdrop is indeed a somewhat worrisome one with surging energy prices meeting slowing demand conditions, and a global supply chain crunch across basic materials. Should global central banks respond to rising inflation expectations by paring bond purchases & tightening monetary conditions, that could act as a trigger for sudden re-pricing of risk assets across the board.

Domestically, the valuation premium of mid & small caps over Nifty stocks at levels similar to early 2018 imply that incremental money flow is likely to be directed towards large caps; the earnings season coming up is expected to be strong for IT, Banks & Chemicals companies, while Consumer-facing companies (Autos, Discretionary & Staples) are expected to face margin pressure.

After a positive opening, the Nifty index wiped out its early gains and traded lower for the day, settling at 17,646 levels with a loss of 176.30 points, while Bank Nifty ended at 37,521.55 levels with a 0.5% fall. All the sectoral indices settled on a negative note wherein Nifty Metal was the prime laggards for the day.

Technically, on the daily chart, the index has formed a Bearish Engulfing candlestick pattern, which suggests some weakness for the coming day. Moreover, a momentum indicator Stochastic witnessed a negative crossover. In addition, on a four hourly chart the index has sustained below Middle Bollinger Band formation, which indicates further correction but the overall trend is still looking bullish, so every dip would be a buying opportunity for the fresh entry. At present, the index has immediate support at 17,500 while resistance at the 17,800 level.

Profit booking was seen in Indian markets along with weak global clues with Dow Futures down 340 points. Investors are advised to keep strict stop loss to positions and avoid any fresh buying at current levels.

Nifty today witnessed a sharp decline in the second half of the session. On hourly charts, we can see a reversal which crossed 89 WMA & 50 DEMA but has taken support by its 100 DEMA. Support further is placed at 17,595 followed by 17,490 & 17,375 & similarly on upside 17,750 will act as immediate hurdle and cross-over will again test 17,850-17,900 levels.

Bank Nifty which was much stable than the main Index but showed us a similar signal, the second half of the session was filled with supply. Now going forward support for Bank Nifty is placed at 37,300-37,100-36,900 & resistance is placed at 37,800 - 38,100 levels.

Selling is quite visible on higher levels for both indices. Sectors are in focus tomorrow – Chemicals, Textiles, Banks & Logistics.

Nifty50 continues to remain in a medium-term uptrend – we expect 18,500 to be conquered going ahead. For the short term well data parameters suggesting positive bias to hold. Immediate support for the index is seen at 17,640, while 18,000/18,200 is expected on the higher side; buying on dips is advisable.

Metals are showing early signs of reversal, while the NBFC space is expected to remain in action; midcap also remains in momentum with outperformance expected to continue.

The USDINR spot closed near 75.00, the highest level since 23rd April of this year. A combination of rising oil prices, fear of liquidity ebbing due to central bank rolling back easing measures, rising bond yields, and weakness in stocks, all have had a negative impact on Rupee.

Carry traders were forced to cover shorts once USDINR broke above 74.65 levels. Bias remains upward. USDINR can trade within a range of 74.80 and 75.40 on spot over the near term.

The market witnessed a correction and an attempt to hold the level above 17,600 for the Nifty 50 Index. Market is going to be crucial for the short-term scenario to sustain above the 17,450-17,550 support zone.

If the market is unable to sustain the level of 17,450-17,550, and market can witness further corrections till the levels of 17,250-17,300.

Strong pressure has been witnessed in the Nifty since the start of the day, resulting index managed to close a day at 17,646 with loss of more than one percent and formed a bearish candle after forming two consecutive bullish candle previously.

The index has decisively breached majority support zone, now going ahead immediate support zone is coming near 17,600-17,500 zone and if it managed to sustain above-said levels, one can expect a swift pullback. Now the good resistance is formed near 17,700-17,770 zone, where again we may see some sort of profit taking.

Weak global markets which resulted in profit booking in metals and IT stocks led domestic indices to trade in red, trimming its early gains. Spike in crude prices is spooking the Indian market while inflation is affecting US bond yields.

RBI commenced its three-day MPC meeting in which the central bank is expected to keep rates unchanged, however, it is likely to announce measures to gradually pump out liquidity from the economy.

Benchmark indices fell 1 percent on October 6 amid weak global cues.

At close, the Sensex was down 555.15 points or 0.93% at 59,189.73, and the Nifty was down 176.30 points or 0.99% at 17,646. About 1291 shares have advanced, 1754 shares declined, and 115 shares are unchanged.

Hindalco Industries, SBI Life Insurance, IndusInd Bank, JSW Steel and Tata Steel were among the major losers on the Nifty. Tata Consumer Products, ONGC, UPL, Britannia Industries and HDFC Bank were among major gainers.

All sectoral indices ended in the red with capital goods, IT, metal, pharma, auto, realty and PSU Bank indices fall 1-3 percent. BSE midcap and smallcap indices fell 0.5-1.2 percent.

US stock index futures fell about 1% in early New York hours on Wednesday as soaring oil prices fed into fears of higher inflation, while a stalemate continued in the US Congress over the government debt ceiling.

Asian and European stocks fell earlier in the day as oil hit a multi-year high above $83 a barrel amid a rally in global energy prices, fuelling concerns that major central banks will tighten monetary policy to counter sharp price rises.

Inflation at 5.3% in August came within the target range of the RBI for the second consecutive month. While the high fuel inflation and coal shortage indicated price risk, the impact is largely to offset by low food inflation. Alternatively, GDP growth at 20.1% in Q1FY22 came below the RBI’s own estimate of 21.4%.

Given moderation in headline and core inflation and below estimated Q1 GDP growth, we expect RBI to maintain status quo in next monetary policy with accommodative policy stance.