Indian shares ended lower for the second consecutive session on July 26 amid selling across sectors, with investors worried about a big rate hike by the US Federal Reserve on July 27.
At close, the Sensex was down 497.73 points, or 0.89 percent, at 55,268.49, and the Nifty was down 147.20 points, or 0.89 percent, at 16,483.80.
"Concerns over the global economic slowdown accelerated further as global corporate majors continued their trend of downgrading future estimates," said Vinod Nair, Head of Research at Geojit Financial Services.
The Fed’s meeting, which is expected to maintain its aggressive rate hike of 75 bps, weighed on recession fears, especially in western markets. “Even though the domestic market is showcasing strength, the spillover effect from the western market is inevitable," he added.
Infosys, HUL, Axis Bank, Dr Reddy’s Laboratories and Bajaj Auto were among the top Nifty losers, while gainers included Bajaj Finserv, JSW Steel, Grasim Industries, Bharti Airtel and Coal India.
Among sectors the information technology index shed nearly 3 percent, while auto, pharma and FMCG indices were down a percent each.
"The Fed is likely to raise rates by 75 bps on July 27th, taking the Fed funds rate to 2.25 - 2.50 percent. Even though ultra-inflation hawks are arguing for a 100 bps rate hike on 27th, that is a very low probability event," said VK Vijayakumar, Cheif Investment Strategist at Geojit Financial Services.
If data indicates that inflation has peaked, the Fed is likely to slowdown rate hike to 50bps in September and thereafter 25 bps to reach a terminal funds rate of around 3.5 percent by mid 2023, he said.
"Since the probability of recession and a threat of stagflation is rising, the Fed has a difficult balancing act ahead of it. Since China and Europe are struggling with lower growth, the Fed has to ensure that its rate hike would not lead to hard landing of the global economy," Vijayakumar said.
Stocks and sectors
All the sectoral indices ended in the red on the BSE, with metal, IT, pharma, auto, bank, capital goods, realty and FMCG indices down 1-2.8 percent.
Broader indices underperformed the benchmarks, with BSE midcap and smallcap indices falling more than a percent each.
A long build-up was seen in Bajaj Finseve, Sun TV Network and Delta Corp, while a short build-up was seen in Persistent Systems, Intellect Design Arena and Mphasis.
Among individual stocks, a volume spike of more than 200 percent was seen in Delta Corp, RBL Bank and Sun TV Network.
More than 100 stocks touched their 52-week highs on the BSE, including ITC, Coromandel International and Adani Enterprises.
Outlook for July 27
Rupak De, Senior Technical Analyst, LKP Securities
The Nifty slipped lower before ending the day, as the proximity to the upper band of the rising channel on the daily timeframe attracted selling pressure.
A "lower top lower bottom" formation is visible on the hourly chart, which indicates near term bearishness.
On the lower end, immediate support is at 16,400-16,350, below which the index may fall to 16,000. On the higher end, resistance is visible at 16,600, above which the uptrend will resume.
Shrikant Chouhan, Head, Equity Research (Retail), Kotak Securities
Traders were nervous ahead of the US Federal Reserve meet and trimmed their position by dumping IT, banking and realty stocks. As the market had gained through the last week, investors booked profit given the overall negative sentiment.
Technically, on intraday charts, the Nifty maintained a lower top formation and formed a bearish candle on daily charts, which suggests further correction.
For traders, 16,600 will act as an immediate resistance and below it, the correction is likely to continue to 16,400-16,350. A fresh uptrend rally is possible only after the index goes past 16,600. It can then retest 16,700-16,735.Disclaimer: The views and investment tips expressed by experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.