Nifty slips below 18,900 in biggest losing streak since 28 Feb; US bond yield surge, inflation concerns loom large

Sensex fell 500 points or nearly 1 percent and Nifty slipped below 19,000 after 81 days.

Bears dominated Dalal Street as the Indian share market extended losses on October 26. Benchmark indices fell for the sixth straight session in the biggest losing streak since 28 February 2023. BSE Sensex tanked over 800 points, or 1 percent, while NSE Nifty 50 slipped below 18,900 amid inflation and recession concerns.

Persistent FII selling and weaker-than-expected Q2 FY24 earnings also weighed on Indian equities. Even a decline in oil prices has not been enough to divert attention from rising US bond yields and an escalating geopolitical crisis in the Middle East.

"There is risk-off in global equity markets triggered by a combination of economics and geopolitics. The Israel-Hamas conflict continues to be a major headwind for markets,” said V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services.

“If the conflict lingers for long it has the potential to impact global growth, too, when the global economy is already in the midst of a slowdown,” he added.

However, in the near term, the strongest headwind for the market is the stubbornly high US bond yields. With the 10-year bond yield at nearly 5 percent, FPIs are likely to be in the ‘sell’ mode, according to Vijaykumar.

"Sectors like banking and IT which constitute the largest segments of the AUM of FPIs are likely to be under pressure. This will provide opportunities for long-term investors to buy quality stocks, particularly in banking, at attractive rates," he said.

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All NSE sectoral indices were trading in red with Nifty Media, and Nifty Realty leading the losses, falling over 2 percent. Nifty FMCG, Nifty IT, Nifty Metal, Nifty Pharma, Nifty PSU Bank, and Nifty Auto indices also fell in the range of 0.8 - 1.8 percent.

Share market expecting an economic slowdown?

The market is undergoing a notable correction, largely influenced by global factors. This correction is evident across various asset classes in most markets, reflecting concerns about supply-side disruptions and the persistence of higher inflation.

Interestingly, the markets seem to be a step ahead of the US Federal Reserve, with expectations of a potential slowdown and even a looming recession in the US, Mihir Vora, Chief Investment Officer, TRUST Mutual Fund, told CNBC TV18.

Should investors buy or sell? Check support, resistance

Foreign Institutional Investors (FIIs) have been selling significantly in October. "Nifty's major support is at 18,921, while Bank Nifty faces downside risks at 41,500. Nifty's options data suggests a trading range of 18,900-19,500," said Prashanth Tapse, Senior VP (Research), Mehta Equities.

The preferred trade strategy for Nifty is to buy on dips between 18,950-19,000 with targets at 19,379 and 19,55. For Bank Nifty, buying between 42,500-42,600 is recommended with targets at 43,500 and 44,000," Tapse said.

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