Equities once again fell prey to heavy selling on August 22, which resulted in indices closing in the red for the second consecutive day. Additionally, it was the market's biggest fall in two months.
Selling was witnessed across the board on the back of weak global markets and a rising dollar index as investors remained worried over the possibility of continued aggressive rate hikes by the Fed going ahead.
After a weak start, the benchmarks extended the losses as they slipped over a percent before closing near the day's low point.
At Close, the Sensex was down 872.28 points or 1.46% at 58,773.87, while the Nifty was down 267.80 points or 1.51% at 17490.70.
“Consolidation was triggered in the market in anticipation of tighter monetary policy by the Fed and worries over a slowdown in global economic activity,” said Vinod Nair, Head of Research at Geojit Financial Services.
“The current risk-reward is not favouring investors as the Nifty50 is now trading at a premium valuation of 21.5x P/E (1yr fwd basis), above the long-term average. The rising dollar index and higher US10 year bond yield act as the near-term headwinds for the market,” he added.
Tata Steel, Asian Paints, Adani Ports, Tata Motors, and JSW Steel were among the major Nifty lowers.
The gainers were ITC, Coal India, Tata Consumer Products, Nestle India, and Britannia Industries.
Among sectors, Nifty Bank, Auto, Information Technology, Metal, Pharma, and PSU Bank lost 1-2 percent.
Also Read - Markets on a downhill drive: Key factors behind the slump
Stocks and sectors
On the BSE, Auto, Realty and Metal indices fell 2 percent each, while Bank, Healthcare, Capital Goods, Oil & Gas, and Information Technology were down 1 percent each.
BSE midcap and smallcap indices shed over 1 percent each.
A short build-up was seen in HPCL, GNFC, and Trent, while a long build-up was witnessed in Sun TV Network, PI Industries, and Colgate Palmolive.
Among individual stocks, a more than 400 percent volume spike was seen in Torrent Power, PI Industries, and Colgate Palmolive.
Over 100 stocks touched their 52-week highs on the BSE including Adani Power, Torrent Power, DB Corp, ITC, and PC Jeweller.
Outlook for August 23
Gaurav Ratnaparkhi, Head of Technical Research, Sharekhan by BNP Paribas
The Nifty had formed a Shooting Star candlestick pattern on the weekly chart for the last week. Also, on the daily chart, the index had seen few bearish developments on August 19. Thus, follow-through action was witnessed on the downside on August 22.
In the week gone by, the index had crossed a falling trendline; however, it couldn’t sustain in the higher territory & has tumbled below the trendline today. This shows that the bears are having the upper hand currently.
The short-term momentum indicators are also in favor of the bears. Thus, the index is likely to witness a further decline in the coming sessions. It can test 17,300 & 17,000 on the downside. On the other hand, 17,700-17,750 will act as a near-term hurdle zone.
Also Read: Investors lose Rs 6.5 lakh crore in two days as Fed rate hikes concerns weigh on markets
Shrikant Chouhan, Head of Equity Research (Retail), Kotak Securities Ltd
Market sentiment could remain volatile in coming sessions as the focus would shift back to global concerns of falling crude oil prices amid weakening demand, and the US-China tussle over Taiwan.
Technically, a sharp intraday sell-off and bearish candle on daily charts is indicating a continuation of weakness in the near future. However, a quick pullback rally is likely if the index trades above its key resistance level of 17,575. Below the same, the correction wave will continue till 17,400-17,350.
Rupak De, Senior Technical Analyst at LKP Securities
Nifty slipped back below the falling trend line, indicating a failed breakout. At the lower end, the price has corrected towards the support zone of 17,500-17,400.
Over the near term, a fall below 17,400 may trigger a further correction in the market. At the lower end, support is visible at 17,200/17,000. On the other hand, the Nifty may recover towards 17,700 if it doesn't fall below 17,400.
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