Indian markets snapped its three-week winning streak and closed lower by about 3 percent for the week ended October 4, but the fall was more severe in the broader market space.
For the week, the S&P BSE Senses fell 2.9 percent while the Nifty closed 2.94 percent down for the week ended October 4, compared to a 3.8 percent drop seen in the S&P BSE Midcap index, and 3.9 percent plunge recorded in the S&P BSE Smallcap index.
In the smallcap space, as many as 138 stocks fell 10-30 percent which include names such as Praj Industries, DCB Bank, Eros International, JustDial, Dish Tv India, JM Financial, Rolta India, IDFC Ltd, Unitech, Delta Corp, Dewan Housing, and Indiabulls Ventures.
In the S&P BSE Index, nearly 50 stocks fell 10-40 percent for the week ended October 4 which include names such as Union Bank of India, Adani Power, Hindustan Copper, Sobha Ltd, JM Financial, ZEE Entertainment, Coffee Day, Reliance Capital and Indiabulls Housing Finance.
Weak global cues, as well as muted domestic data concerning goods and services tax (GST) collections, core sector data, auto sales numbers, fresh stress in the banking system, and sharp downgrade in GDP forecast by the Reserve Bank of India (RBI), fuelled profit-taking.
"This week market witnessed profit booking post huge rally of ~8 percent on account of the corporate tax cut. The cut in repo rate by RBI didn’t inspire confidence to investors given sharp downgrade in GDP growth forecast. FII continues to be on risk-off mode on account of global slowdown and trade issues," Vinod Nair Head of Research: Geojit Financial Services told Moneycontrol.
"Initially, the consolidation started as minor profit booking, which extended due to contraction in core sector growth and sharp fall in GST collections to a 19-month low. Investors were concerned given large fiscal measures and falling tax revenues, the government fiscal target of 3.3 percent is at risk. Continued weakness in auto sales was another setback for the market," he said.
The consolidation was broad-based but banking stocks were particularly under severe pressure due to fresh stress in the system impacting the sentiment.
The Monetary Policy Committee (MPC) on expected lines did slash rates by 25 bps but the sharp downgrade in the GDP forecast for FY20 weighed on sentiment.
"Considering the economic slowdown and other weak macro data points announced earlier, the downward revision in GDP forecast was expected. However, this was a second GDP growth downgrade in the year. Earlier in the year as well, the RBI had marginally reduced the GDP growth target to 6.9 percent from 7 percent," Ajit Mishra, Vice President Research, Religare Broking told Moneycontrol.
"However, the sharp cut of 80 bps cut (6.1 percent as against an earlier estimate of 6.9 percent) in the current monetary policy is likely to weigh on the investor sentiments in the near term," he said.
The Nifty index failed to hold its gains at higher zones and corrected more than 230 points from its intraday high of 11,400 levels.
The index formed a Bearish Candle on a daily and weekly scale. Fifth straight selling in a row pushed the index below its crucial short and long term moving averages. The index broke below its 200-DEMA to close below 11,200 levels.
"It looks like resistance are gradually shifting lower and now as long as it holds below 11,250 zones, the weakness could extend towards 11,111 and then towards 11,050 levels while on the upside hurdles are seen at 11,250, and then around 11,333 zones," Chandan Taparia, Associate Vice President, Analyst-Derivatives at Motilal Oswal Financial Services told Moneycontrol.
Bank Nifty failed to hold its gains above 28,700 levels and corrected nearly 1,000 points to close below 27,750 zones.
The index formed a Big Bearish Candle on daily as well as on a weekly scale as sustained selling pressure was seen at higher zones and it relatively underperformed the benchmark index.
"Resistance is gradually shifting lower and now till it holds below 28,000 zones weakness could be seen towards next support of 27,500 then 27,250 levels while on the upside hurdle is seen at 28,250 then 28,500 zones," said Taparia.
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