Domestic equity benchmarks the Sensex and the Nifty ended almost 2 percent lower on June 10, tracking weak global cues as investors remained worried over soaring inflation and slowing economies.
The focus now has shifted to the next week's US FOMC meet and the US inflation data while the rate hike guidance from the European Central Bank (ECB) also worried investors. As reported by Reuters, the ECB said on June 9 that it would deliver its first interest rate rise since 2011 next month, followed by a potentially larger move in September.
A Reuters poll of economists showed rate hikes may continue this year. US Federal Reserve may hike its key interest rate by 50 basis points in June and July, with rising chances of a similar move in September, reported Reuters.
Crude oil prices remained elevated as the Brent Crude traded near the $125 a barrel mark while the rupee fell 8 paise to close at 77.84 per dollar on June 10. Analysts expect the rupee to depreciate towards the 78.20 mark in the near term and 78.50 from a medium-term perspective.
"Rising inflation fears gripped the domestic market leading to heavy sell-off ahead of the release of US inflation data and Fed policy meet next week. The inflation data will be crucial to sense the quantum of a rate hike. European Central Bank in its policy meeting signalled to start rate hike from next month and a large change in September. Persisted foreign fund outflow and widening trade deficit due to the elevated oil prices led to depreciation of the rupee, weakening the sentiment," said Vinod Nair, Head of Research at Geojit Financial Service.
Sensex ended with a loss of 1,017 points, or 1.84 percent, at 54,303.44 while the Nifty closed the day with a loss of 276 points, or 1.68 percent, at 16,201.80.
BSE Midcap and Smallcap indices closed 0.64 percent and 0.70 percent lower, respectively. Among the sectoral indices, oil & gas, IT, finance and energy indices fell more than 2 percent each.
On a weekly basis, the Sensex fell 2.63 percent while the Nifty slipped 2.31 percent. BSE Midcap index declined 1.25 percent while the Smallcap index suffered a loss of 2 percent for the week ended June 10.
The overall market capitalisation of BSE-listed firms dropped to ₹251.81 lakh crore from ₹257 lakh crore on June 3, making investors poorer by ₹5.2 lakh crore in a week.
"Markets will continue to take cues from the global markets in absence of any major domestic event. First, participants will react to the US inflation data and upcoming macroeconomic data (IIP, CPI & WPI) will also be in focus. While the index is gradually inching lower, a mixed trend on the sectoral front is offering opportunities on both sides so traders should align their positions accordingly," said Ajit Mishra, VP - Research, Religare Broking.
Amol Athawale, Deputy Vice President - Technical Research, Kotak Securities, observed the Nifty closed below the 20-day simple moving average (SMA) and, on intraday charts, it is consistently forming a lower top formation which is largely negative.
"On the weekly charts, the index has formed a long bearish candle indicating further downtrend from the current levels. If the Nifty falls below 16,150, it could slip up to 16,000-15,850 levels. On the flip side, a fresh pullback rally is possible only after the 16,300 breakout. Above which, the index could move up to 16,400-16,500,” said Athawale.
Mazhar Mohammad, Founder & Chief Market Strategist, Chartviewindia.in pointed out that the force with which Nifty has fallen on the last day of the week seems to have dissipated the hopes of a pullback attempt. Moreover, a bearish candle as a follow-through to the preceding week’s 'Shooting Star' kind of formation is acting as some sort of confirmation for the resumption of the down move.
Mohammad added that a breach of the 20-day SMA is further strengthening the bearish sentiment. Hence, the Nifty may initially slide down towards the recent lows of 15,900 to 15,735. For the time being, the upside may remain capped at 16,324 whereas a close above this level may signal sideways consolidation. It looks prudent to remain neutral on the index trades, he said.
As per Deepak Jasani, Head of Retail Research, HDFC Securities, Nifty closed below the gap support of 16,204 and now 16,026 will be the next support while 16,356 will be the resistance.
Disclaimer: The views and recommendations made above are those of individual analysts and not of MintGenie.