Closing Bell: Nifty below 19,400, Sensex down 542 pts; pharma bucks the trend

Taking Stock: Market flashes red again; Sensex down 542 points, Nifty below 19,400

UPL, Titan Company, Bajaj Finserv, ONGC and ICICI Bank were among the top Nifty losers. The gainers included Adani Enterprises, Eicher Motors, Divis Labs, Infosys and Adani Ports... Read More

Weak global market sentiment triggered a collapse in local equities , as investors shunned banking, realty, oil & gas and metal shares. Rising US bond yields and the dollar index have been weighing on the sentiment, which is leading to sharp corrections in emerging market indices. Technically, after a muted opening the index breached the important support level of 19450 and post breakdown it intensified the weak momentum.

Currently, the index is comfortably trading below the 20 day SMA (Simple Moving Average) and is also holding a lower top formation on intraday charts, which is indicating further down side from the current levels. On the higher side, the market could move up till 19450-19500. On the flip side, below 19350, the selling pressure is likely to accelerate. Below which, the market could slip till 19300-19250.

The Indian equity market tumbled over the global woes and significantly corrected for the consecutive day in the week. Initially, Nifty managed to shrug off the weakened global developments and tried to become stable, but a sell-off got triggered in the latter half, which dragged the index to lower levels. Eventually, by the penultimate hour, we witnessed some recovery from intraday lows which led Nifty to settle a tad below 19400, with a cut of 0.74 percent on the daily time frame.

Though the fall in the last two trading sessions was severe in nature but was mainly because of the external macro factors; hence we should not be apprehensive for the time being. On the technical charts, the benchmark index is hovering near the sacrosanct support of the bullish gap at 19201-19235, which might act as a pitstop for the bears in the near term, before which 19300 might provide some cushioning. While on the flip side, 19500 is likely to be seen as an immediate hurdle (coincides with 20 DEMA), followed by the bearish gap around 19680 in the comparable period.

Going ahead, the macro factors and global developments are likely to dictate the near-term trend in the market. Hence, staying abreast of domestic and global developments is advisable. Meanwhile, one must avoid undue risk and focus on a pragmatic approach till uncertainty prevails.

Following the negative impact carried over from the previous session, Bank Nifty opened lower and without any valiant effort to bounce back, prices continued to decline for the most part of the session. However, during the final hour, there was a slight rebound similar to the previous session, but it still ended with a percent cut, closing just above 44500.

Bears remain dominant in this week, as prices are breaking intermediate support easily. On the daily chart, prices have closed slightly below a support confluence formed by (i) the Previous Swing Low, (ii) 50 SMA, and (iii) the 61.8% retracement level of the rally seen from the June swing low. This support zone becomes crucial for any potential bullish comeback. However, if breached, prices could decline further, ahead of the significant RBI policy announcement next week.

The ongoing global cues continue to exert a major influence, with positive domestic news having limited impact. The market's future trajectory will continue to depend on the developments in global bourses, hence one needs to keep an eye over there. The key levels to watch are the weekly swing high of 44150, followed by the 89EMA at 43900, which could act as support. On the flip side, resistance levels are shifted lower at 45000 – 45200 levels. The volatility is likely to remain on the higher side hence one needs to avoid undue risk.

Nifty slipped further as the bears continued to remain at the helm. The index fell sharply following a breakdown below 19500. However, 19300 acted as support on a sustained basis for the day. Going forward, 19300 may act as crucial support, while, on the higher end resistance is seen at 19500/19650.

Markets extended the decline on the weekly expiry day and lost over half a percent. After the flat start, Nifty traded in a narrow range but selling pressure in heavyweights pushed the index gradually lower. However, a rebound in the final hour, similar to Wednesday’s session, trimmed losses and it finally closed at 19,381.65 levels. Most sectors traded in sync and ended lower wherein realty, banking and financials were among the top losers. On the other hand, the broader indices witnessed some respite and ended flat.

The recent drift in the global indices is putting pressure now and we expect the negative tone to continue. On the index front, the breakdown of the trend line support further added to the negativity but the existence of support at 19300 capped the downside. We reiterate our view to keep a check on positions and focus more on risk management.

The Bank Nifty index remains under the control of the bears, leading to a correction with the index reaching the 44500-44400 zone. This zone holds critical importance as it acts as a crucial support level for the index. If the index fails to sustain this level, further downside movements might be expected towards 44000 levels.

However, there is a possibility of a pullback if the index manages to sustain the current support zone. In that case, the index could potentially move towards 45000 or 45200 levels.

The Nifty opened a gap down today and continued to drift lower throughout the day to close in the negative down ~145 points. On the daily charts, we can observe that the Nifty has witnessed follow-through selling pressure and closed in the negative for the second consecutive session. On the downside, it has drifted towards a 40-day moving average (19285) which can act as an immediate support zone to watch out for. On the upside, the key hourly moving average placed in the range 19560 – 19590 shall act as an immediate hurdle zone from a short-term perspective. Considering the sharp fall in the last couple of trading sessions we can expect a pullback/consolidation over the next few trading sessions. Overall, the trend is still negative, and we expect levels of 19100 from a short-term perspective.

Bank Nifty has also witnessed a continuation of the fall. It has closed below the 40-day moving average (44861) which is a sign of weakness. On the downside, the fall appears overstretched and hence a pullback cannot be ruled out. It can bounce till 45000 – 45200 where the key hourly moving averages are placed. Overall, the trend is still negative and we expect it to drift lower to 44000 in the short term.

Global markets are still grappling with the impact of the US rating downgrade, with spiking bond yield and strengthening dollar index. However, the pharma sector has managed to weather the storm thanks to its strong earnings outcome, while mid and small-cap stocks have outperformed the benchmark index. The domestic service PMI has surpassed market expectations, reaching a 13-year high due to a rise in new orders, particularly in international sales.

The Indian rupee closed to its weakest level in a month after touching a low of 82.81 in an intraday trade amid risk-averse sentiments and dollar demand from importers.

The focus will remain on the dollar index, crude oil prices and risk moods for short-term directional trends.

Spot USDINR has formed a Doji candlestick pattern at the upper band of the Bollinger band, which is a sign of indecisiveness from the traders. The pair has been facing multiple top resistance in the range of 82.80 to 83.30 for the last ten months. It has support at 82.26, which is the 50, 100 and 200 days simple moving average.

A combination of the long-term structural factors and the near-term strengths seems to have inspired Morgan Stanley’s decision to upgrade its views on India's markets to overweight.

In the latest quarter, India grew by 6.1%, exceeding market expectations by ~100 bps and continues to be the fastest-growing big economy in the world. The service sector, construction and agriculture saw a faster increase than predicted. Plus, India is experiencing an extended period of macroeconomic stability with a much better current account deficit, adequate reserves, and manageable inflation.

India has long-term structural interest among most investors. The prevailing narrative among global FPIs is India's growing business and political stability, superior demographics, regulatory strength, manufacturing potential, and sovereign investor friendliness.

Over the next few years, FPIs will allocate more to India if this structural narrative remains intact, macroeconomic stability is maintained, and relative values don't become completely irrational.

Indian rupee closed 15 paise lower at 82.73 per dollar versus previous close of 82.58.

Indian benchmark indices ended lower on August 3 with Nifty below 19,400.

At close, the Sensex was down 542.10 points or 0.82 percent at 65,240.68, and the Nifty was down 144.80 points or 0.74 percent at 19,381.70. About 1758 shares advanced, 1702 shares declined, and 145 shares unchanged.

UPL, Titan Company, Bajaj Finserv, ONGC and ICICI Bank are among the top losers on the Nifty, while gainers included Adani Enterprises, Eicher Motors, Divis Labs, Infosys and Adani Ports.

Among sectors, pharma index gained 1 percent, while bank, metal, oil & gas and realty down 1-2 percent each.

The BSE Midcap and Smallcap indices ended on flat note.