Key equity indices, the Sensex and the Nifty ended lower for the second consecutive session on February 20 amid mixed global cues with banking and energy stocks as top drags.
Global market sentiment was mixed as the risk appetite of investors remain low anticipating rate hikes for a more extended period.
Recent data have revealed that the US economy has been doing better than expected while inflation is still high. This makes a case for the continuation of rate hikes for a longer-than-expected period.
Analysts see a possibility of the US Fed rates peaking at around 5.3 percent by July 2023 whereas there may be a quarter-point rate cut by December 2023.
As the US markets were shut for the Presidents' Day holiday, Sensex opened 110 points higher at 61,112.84 following gains in some of its Asian peers.
However, it started going down in the second half, following weakness in the European markets.
Sensex closed 311 points, or 0.51 percent, lower at 60,691.54. Nifty50 ended at 17,844.60, down 100 points, or 0.56 percent. Second-rung indices the BSE Midcap (down 0.12 percent) and Smallcap (down 0.16 percent) also ended in the red.
Banking and energy stocks, including Reliance Industries, HDFC twins, ICICI Bank, Kotak Mahindra Bank, Axis Bank, SBI and Bajaj Finance, were the top drags on the Sensex index.
The overall market capitalisation of BSE-listed firms dropped to ₹265.9 lakh crore from ₹266.9 lakh crore in the previous session on February 17, making investors poorer by one lakh crore rupees in a single session.
As many as 184 stocks, including Adani Transmission, Adani Total Gas, Bata India, Biocon, Crompton Greaves Consumer Electricals, Emami and Relaxo Footwears, hit their 52-week lows in intraday trade on BSE.
Crude oil prices rose, lifted by hopes of demand revival in China. Brent Crude traded near the $84 per barrel mark.
The rupee rose about 10 paise to close at 82.73 per dollar.
Top Nifty gainers: Shares of Divi's Labs, UltraTech Cement and Tech Mahindra ended as the top gainers in the Nifty index.
Top Nifty losers: Shares of Adani Enterprises, Cipla and Britannia Industries ended as the top laggards in the Nifty pack.
Barring Nifty IT (up 0.54 percent) and Auto (up 0.28 percent), all sectoral indices ended in the red, with Nifty Bank, PSU Bank and Oil & Gas falling over a percent each.
Commenting on Bank Nifty, Kunal Shah, Senior Technical Analyst at LKP Securities said the trend remains negative for the index and one should keep a sell-on-rise approach as long it stays below the level of 41,500 where the highest open interest is built up on the Call side. He said the next support is visible at 40,000 where some amount of Put writing is visible.
Nifty Private Bank, Financial Services, Pharma and Metal fell almost a percent each.
Experts' views on markets
V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services believes the negative sentimental impact of the Adani issue appears to be behind us. The likely hawkish stance of the US Fed will restrain the rally in the US market and this will also keep the Indian market in a range, attracting selling at higher levels and buying at lower levels.
"Comments from some Fed officials that they might have to remain hawkish for an extended period of time and might support even a 50 bp rate hike in the March Fed meet are negative for equity markets," said Vijayakumar.
Vijayakumar pointed out that valuations of the leading banking names, large-cap IT and capital goods companies are reasonable now and may be accumulated on declines.
Shrikant Chouhan, Head of Equity Research (Retail) at Kotak Securities pointed out that drubbing in banking stocks dragged down the markets today, which languished in the negative territory for the major part of the trading session.
"Factors such as more pain going ahead through further rate hikes, rising inflation, and the recent Adani saga continue to weigh on investors' minds. Also, Indian stocks are still expensive compared to China, and hence investors are taking this opportunity to curb their holdings," said Chouhan.
Technical views on markets
Chouhan underscored that a bearish candle on daily charts is indicating further weakness from the current levels. However, the Nifty is trading near the 20-day simple moving average and Sensex is trading near the important support level of 60,600.
"If the index succeeds to trade above 17,900, a quick pullback rally is not ruled out. Above this, it could move up to 18,000-18,125. On the flip side, a fresh selloff is possible only after the dismissal of 17,800 and below the same, the index could slip till 17,730-17,700,” said Chouhan.
Jatin Gedia, Technical Research Analyst at Sharekhan by BNP Paribas highlighted that on the daily charts, the Nifty has come back within the downward sloping channel from which it broke during the last week. On the hourly charts, the index has closed below the key hourly moving averages which is a sign of weakness in the short term.
Prices are moving along the hourly lower Bollinger band which is expanding indicating that the fall is likely to continue.
"Considering the above parameters we change our short-term outlook on the Nifty to sideways. The range of consolidation is likely to be 18,150 – 17,650. In terms of levels, 17,920 – 17,970 shall act as immediate hurdle one while on the downside the 17,650 – 17,600 which convinces with the 61.82 percent Fibonacci retracement level shall act as crucial support to watch out for from a short-term perspective," said Gedia.
Key market data
Disclaimer: The views and recommendations given in this article are those of individual analysts. These do not represent the views of MintGenie.