The Indian market suffered deep cuts on September 16 due to an across-the-board selloff amid weak global cues as investors braced for aggressive rate hikes by the US Fed next week.
While a 75bps hike is widely anticipated, some analysts see the possibility of a 100bps hike on September 21. When the US economy is already showing signs of stress, further rate hikes will inflict more pain on the economy and the market.
Sensex opened 348 points lower at 59,585.72 and touched the intraday low of 58,687.17, falling 1,247 points. The index closed with a loss of 1,093 points, or 1.82%, at 58,840.79. The Nifty50 closed with a loss of 347 points, or 1.94%, at 17,530.85.
BSE Midcap and Smallcap indices underperformed, falling 2.85% and 2.38%, respectively.
The sentiment was weak in major markets amid concerns over rate hikes and economic slowdown. "The World Bank's chief economist said on Thursday he was worried about a period of low growth and high inflation in the global economy. The International Monetary Fund said downside risks continue to dominate the global economic outlook but it is too early to say if there will be a widespread global recession," reported Reuters.
"With persistent bearish pressure from global stocks amid rising yields and dollar index, the domestic market surrendered to the global trend despite its strong decoupling scenario and encouraging macroeconomic data. Post the release of US inflation data, which showcased a month-on-month increase in inflation, the global market has been pricing in the likelihood of a more aggressive policy response from the Fed," Vinod Nair, Head of Research at Geojit Financial Services pointed out.
IndusInd Bank was the only stock that ended in the green in the Sensex index. Shares of Tech Mahindra, UltraTech Cement, Infosys, Mahindra & Mahindra, Wipro and TCS ended as the top laggards in the Sensex index.
Among the sectoral indices, BSE IT, Basic Materials, Realty and Teck lost over 3% each. BSE Oil & Gas, Consumer Durables, Capital Goods, Auto, Industrials, Energy and Consumer Discretionary Goods & Services fell more than 2% each.
Crude oil prices remained subdued due to concerns that a recession in top economies will hit demand. The rupee extended losses and settled 4 paise lower at 79.74 per dollar.
For the week, Sensex and Nifty fell 1.6% and 1.7% respectively whereas BSE Midcap and Smallcap indices declined 1.5% and 1.1% respectively.
The overall market capitalisation of BSE-listed firms dropped to ₹279.8 lakh crore against ₹283.03 lakh crore on September 9, making investors poorer by ₹3.23 lakh crore in a week.
"As global investors brace for a further interest rate hike post the US inflation data released recently, the RBI too has its task cut out in India when they meet at the end of this month. Spectacular monsoon in India coupled with several positive tailwinds provides a plethora of investment opportunities in the broader markets," said S Ranganathan, Head of Research at LKP securities.
As per Deepak Jasani, Head of Retail Research, HDFC Securities, the market seems to have started the downward move after forming a triple top on daily charts over the last three days.
"On the weekly charts, Nifty has formed a bearish dark cloud cover. 17,401 and 17,170 are the next levels on the downside that may provide temporary support. On up moves, 17,771 may be difficult to breach in the near term," said Jasani.
The double top formation on daily and intraday charts and bearish candle on weekly charts is indicating further weakness from the current levels.
"If the index trades above 17,450 (which is double bottom support level), then the market is likely to bounce back sharply. For the short-term traders, 17,450 would be the key level to watch out for, above which, the index could bounce back to the 20-day SMA (simple moving average) 17,700 and 17,900 levels. On the flip side, below 17,450, the index could hit 17,300-17,200 levels,” said Amol Athawale, Deputy Vice President - Technical Research, Kotak Securities.
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Disclaimer: The views and recommendations given in this article are those of individual analysts. These do not represent the views of MintGenie.