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Taking Stock: ‘Buy on rumours & sell on news’ plays out on D-St after RBI measures

The Nifty forms a bearish candle on intraday basis but closes above its 5-day EMA

March 27, 2020 / 05:44 PM IST

Indian markets gave up most of their gains and turned negative after the Reserve Bank of India (RBI) unveiled a battery of measures to counter the impact of coronavirus on the already slowing Indian economy.

The S&P BSE Sensex, which was up more than 1,000 points, turned negative once the measures were announced. The Nifty50,too, failed to hold on to 9,000 levels and closed below 8,700.

The sharp reversal seen in D-Street suggests that most of the positives were factored in and it looked like a classic case of “buy on rumours and sell on the news”.

The central bank has effectively cut rates in the system by over 100 basis points, if one were to consider the combined benefit of the repo cut, sharp reverse repo cut, easing of CRR requirement, reduced need of daily CRR balance and MSF facility, say experts.


“The new demand for credit will likely remain tepid, this offers a large sentiment boost, at the very least. Existing borrowers certainly get a big relief in the form of the moratorium in term loans and their working capital payments. The central bank also announced LTROs and banks are to use the proceeds,” Amar Ambani, Senior President and Head of Research, YES Securities, said.

“Full marks to the RBI governor for these commendable and decisive steps. While the stock market erased its gains post the policy announcement, I would imagine that expectations were already built-in over the past three days and I would view the slide as profit booking and not a negative reaction to the measures announced.”

Let’s look at the final tally on D-Street: the S&P BSE Sensex fell 131 points to 29,815 while the Nifty50 closed 18 points higher at 8,660.

With the government and RBI stimulus packages done, the market movement is likely to be driven by development around coronavirus cases and global cues.

“Indices ended almost flat following the RBI measures to lessen the burden on borrowers and to increase liquidity in the system. The markets were up in the last two sessions on the expectations of these announcements from the government and RBI,” Vinod Nair, Head of Research at Geojit Financial Services told Moneycontrol.

“Now since the two expected events are out of the way, focus is back on the spread of the virus and its damage on the already reeling economy."

Top Nifty gainers include ITC, Cipla, Axis Bank and Coal India.

Top Nifty losers include Gail India, Maruti Suzuki, IndusInd Bank, Bajaj Finance, and Hero MotoCorp.

Stocks & sectors

Sectorally, the action was seen in the Bankex which was up 0.96 percent, followed by the S&P BSE public Sector that gained 0.95 percent. The Metal index was up 0.47 percent.

Sectors that witnessed profit-taking include telecom that fell 5.1 percent followed by the auto index that slipped 2.3 percent and the oil and gas index that closed 1.5 percent lower.

On the broader markets front, the S&P BSE Midcap index closed 0.29 percent lower, while the S&P BSE Smallcap index was up 0.28 percent.

Volume spike was seen in stocks such as Bandhan Bank, Escorts, Bajaj Finance, HDFC Life, and Jindal Steel.

Long Buildup was seen in stocks like Kotak Bank, Shriram Transport and Bandhan Bank.

Short Buildup was seen in stocks like Jindal Steel, HDFC Life, GAIL India, and M&M Finance.

Stocks in news

Aurobindo Pharma: The share price spiked 9 percent after the company received the US drug regulator’s nod for its muscle relaxant Tizanidine Hydrochloride.

HDFC Life Insurance Company: Shares plunged almost 8 percent after joint venture partner Standard Life sold 5 crore shares of the company at Rs 441.24 per share.

Sanghvi Movers: Share price cracked 5 percent even as ICRA retained the company's long-term rating at A- but revised outlook to negative from stable.

Telecom stocks plunge: Telecom stocks tanked, with sectoral index settling with deep losses. The BSE Telecom index closed with a loss of over 5 percent, owing to losses in shares of index majors such as Bharti Airtel, Vodafone Idea and Sterlite Technologies, that fell between 2-6 percent.

Technical View

The Nifty formed a bearish candle on an intraday basis but closed above its 5-day EMA.

Profit booking might have kicked in from the psychological resistance point of 9k levels.

Unless the Nifty manages to sustain above 9000, further upside looks unlikely in near term.

A close below 8,500 will trigger a short-term downswing, with eventual target placed in the 8,100– 7,800 zone.

If the Nifty sustains above 9,000, then upward swing shall get extended into the 9,311–9,390 zone.

For the time, traders should wait for a corrective consolidation phase by sitting on the fence.

Three levels to watch: 8,522, 9,038, 9,311
Kshitij Anand is the Editor Markets at Moneycontrol.
first published: Mar 27, 2020 04:27 pm
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