Bearish momentum likely to continue

Sell-off in the Indian equity market accelerated with benchmark indices Sensex and Nifty-50 dropping below crucial 37,000 and 11,000 marks respectively due negative domestic cues and global cues.

US central bank on Wednesday cut lending rate by 25 basis point, first after 2008 but Federal Reserve’s message there may not be many more dashed market’s hope of an onset of a rate cut cycle and easy monetary policy regime in future. US benchmarks S&P 500 fell 1.8 per cent reacting to hawkish US Fed monetary policy stance and finally closed 1.09 per cent. Indian market’s performance was worst among the global market with Sensex and Nifty falling 1.23 per cent and 1.24 per cent respectively.

The Sensex plunged 786.94 points intra-day to day’s low of 36,694.18 after a weak start. However there was strong recovery in the last 45 minutes of trade which helped the index closes above 37,000 level at 37018.32 down 462.80 points or 1.23 per cent.

The broader Nifty-50 index fell more than 200 points intra-day to a low of 10,881.00 but recovered later to close near 11,000 level at 10,980 down by 138 points or 1.24 per cent.

The broader market suffered less with the BSE Mid-cap Index down 0.86 points and BSE Small-cap Index down 1.10 point.

The maximum selling was seen in metal, bank, IT and capital goods stocks, the top sectoral losers were BSE Metal (-3.37 per cent), IT (-1.92 per cent), Bankex (-1.80 per cent), Capital Goods (-1.75 per cent), Healthcare (-0.92 per cent).

Technical View
Deepak Jasani, head -Retail Research, HDFC Securities said, “Technically, while  the  Nifty  has bounced back in the last 45 minutes of trade,  the underlying short term trend remains down.

Further downsides are likely  once the immediate support of 10,881 is broken. Any pullback rallies could find resistance at 11,077-11,108.”

Mustafa Nadeem, CEO, Epic Research said, "The volatility is very high at the moment and we may see some reduction in that going forward. Hence at this point in time, we may see some consolidation while the bearish momentum may continue. The market has breached its all-important moving averages which are decisive for a trend.

“The most important support for the market is at 10,900 where it is having its long term support trend line. Breach of that may take Nifty to 10,600 – 10,200 while if it sustains the 10,900 we may see a pullback to 11,150 – 11,200.”

Market View
Hemang Jani, Head - Advisory, Sharekhan by BNP Paribas said, "Foreign portfolio investors(FPI’s) who brought in good inflows in the last few years have turned net sellers and pumped almost Rs16,000 core out of the markets post the change in tax rules. However domestic institutional investors (DII) have been net buyers in July as they bought equities worth almost Rs 20,000 crore which shows there is still equity appetite among domestic investors at lower levels."