Market Wrap: Market ends a percent lower; Nifty slips below 17,750

Indian indices ended with significant cuts on August 19 amid weak global cues as the risk appetite of investors was dealt a blow by the US Fed officials who said more rate hikes are on the way.

Concerns over inflation continue weighing on market sentiment. German producer prices, which is a leading indicator of inflation, jumped sharply in July, marking their biggest rise on record.

"Producer prices -- a leading indicator for inflation -- surged 37.2% on the year, the biggest rise since records began in 1949, the federal statistics office said on Friday. The month-on-month rise, 5.3%, was also the highest on record," reported Reuters.

On August 17, the UK reported its July inflation in double-digits and the highest in 40 years. The UK's Consumer Prices Index (CPI) rose by 10.1% in July 2022, up from 9.4% in June.

Since inflation prints are soaring globally, it is unlikely that the rate hike regime will end anytime soon. US Fed officials have clearly indicated that they are not going to relent on the rate hikes until inflation comes down to a tolerable level.

As Reuters reported, St. Louis Fed President James Bullard said that given the strength of the economy he is currently leaning toward supporting a third straight 75-basis-point interest rate hike in September.

Investors are worried that rate hikes will result in a recession which will have a lingering impact on the global economy.

Sensex opened at 60,351.23 against the previous close of 60,298.00 and touched a high and low of 60,411.20 and 59,474.57, respectively, in intraday trade. The 30-share pack eventually closed 652 points, or 1.08% lower at 59,646.15.

Only three stocks - Larsen & Toubro (up 2.20%), Infosys (up 0.93%) and TCS (up 0.12%) - ended in the green in the Sensex index. Shares of IndusInd Bank (down 3.82%), Bajaj Finserv (down 3.08%) and Bajaj Finance (down 2.53%) ended as the top laggards in the Sensex kitty of stocks.

Nifty closed the day at 17,758.45, down 198 points or 1.10%. BSE Midcap index closed 1.27% lower while the smallcap index fell 0.93%.

Most sectoral indices suffered losses, with BSE Realty, Metal, Oil & Gas, Bankex, Finance and Energy indices falling up to 2%.

"Profit-booking amid weak global cues impacted domestic indices as concerns about interest rate hikes hung over the markets. Additionally, the recent rally of the dollar index and FIIs turning net sellers have surprised the bulls. Broad-based selling was witnessed with the index heavyweights dragging the index further down," said Vinod Nair, Head of Research at Geojit Financial Services.

Crude oil prices remained soft as Brent Crude traded below the $95 a barrel mark. The rupee, however, fell 10 paise to close at 79.78.

Technicals

Rupak De, Senior Technical Analyst at LKP Securities pointed out that the Nifty has fallen lower as the Indian equities failed to absorb the selling pressure around the 18,000 mark.

"The index has formed a bearish engulfing pattern on the daily chart. The index has found support at the falling trend line. In the near term, the trend is likely to remain sideways to negative. However, a fall below 17,700 may trigger a serious correction in the market. Support on the lower end is visible at 17,500/17,400. On the higher end, resistance is visible at 17,900-18,000," said De.

Key market data

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