Domestic equity benchmarks the Sensex and the Nifty ended about a percent lower on July 26, extending the losing run into the second consecutive session as investors remained cautious ahead of a widely expected 75 bps rate hike by the US Fed.
As inflation across the globe has been at multi-year high levels, central banks have little choice but to raise rates which have stoked fears of a recession in some of the largest economies of the world.
It is widely expected that the US Federal Reserve will opt for another 75 basis point rate hike on July 27, thanks to soaring inflation which surged to 9.1% in June.
In the recent past, inflation and concerns over a recession due to rate hikes have been keeping the market subdued. Even as the market has witnessed short-term rallies, these concerns keep the gains capped.
Sensex suffered a loss of 498 points, or 0.89%, on July 26 to end at 55,268.49 while the Nifty closed 147 points, or 0.88%, lower at 16,483.85.
Shares of Bajaj Finserv (up 5.58%), Bharti Airtel (up 0.83%) and Power Grid (up 0.53%) ended as the top gainers in the Sensex index. On the flip side, those of Infosys (down 3.40%), Axis Bank (down 3%) and Hindustan Unilever (down 2.84%) ended as the top laggards.
Mid and smallcaps suffered more as the BSE Midcap index fell 1.21% while the Smallcap index ended with a loss of 1.20%.
"Concerns over the global economic slowdown accelerated further as global corporate majors continued their trend of downgrading future estimates. The Fed’s meeting commencing today, 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," said Vinod Nair, Head of Research at Geojit Financial Services.
The selloff was broad-based as all sectoral indices ended in the red with BSE IT (down 2.84%) and Teck (down 2.23%) falling more than 2% each.
“Traders were nervous ahead of the US Federal Reserve meet on rate decision on Wednesday and hence trimmed their position by dumping IT, banking and realty stocks. As the market has already risen continuously last week, investors are booking profit given the overall negative sentiment," said Shrikant Chouhan, Head of Equity Research (Retail), Kotak Securities.
"On intraday charts, the Nifty has maintained a lower top formation and also formed a bearish candle on daily charts, which suggests further correction from the current levels. For traders, 16,600 would act as an immediate resistance level and below the same, the correction wave is likely to continue till 16,400-16,350. A fresh uptrend rally is possible only after the 16,600 breakouts. Above which, the index could retest the level of 16,700-16,735,” said Chouhan.
Rupak De, Senior Technical Analyst at LKP Securities pointed out a "lower top lower bottom" formation is visible on the hourly chart, which indicates a near-term bearishness.
"On the lower end, immediate support is placed at 16,400-16,350, below which the index may fall towards 16,000. On the higher end, resistance is visible at 16,600, above which the uptrend resumes," said De.
Disclaimer: The views and recommendations made above are those of individual analysts and not of MintGenie.
