Sensex and Nifty tumble as weak global cues cause market mayhem

Bears have hugged equity markets real tight as Sensex fell 860.62 points or 1.48 percent at 57238.30 and Nifty declined 285.50 points or 1.65 percent at 17041.80 as of 10:14 am following weak global cues. About 423 shares have advanced, 2,704 shares declined, and 91 shares remain unchanged.

All sectoral indices are trading in the red with auto, metals, power and realty indices down over three to four percent each. The BSE midcap and smallcap indices shed three percent each.

According to Anand James, chief market strategist at Geojit Financial Services, the pull of 17,000 has become irresistible now: “That it coincides with the 200-day simple moving average makes it all the more compelling for Nifty to pay a visit to 17,000, after closing just 1.7% away from it on Friday.”

“Ideally, a breach of 17,000 will bring 16,000 into the picture, with interim support seen at 16,650. Meanwhile, given that a sharp drawdown is already in place, we will watch the ability of 17,166, the recent reaction low, to let bulls regroup early in the day and aim for a recovery push to 17,430,” he said.

Here are the factors pulling the markets lower:

Weak global cues:

The Dow Industrials was poised to confirm a bear market as a deepening downturn in business activity across the euro zone, and US business activity contracting for a third straight month in September, left Wall Street wallowing in a sea of red. The Dow Jones Industrial Average fell 2.35 percent on Friday, making it the first major US stock index to fall below its June trough on an intraday basis. The S&P 500 lost 2.50 percent and the Nasdaq Composite dropped 2.55 percent on Friday.

Among the Asian names, Nikkei, Taiwan and Kospi are down over two percent each while Shanghai and Hang Seng are trading flat today. SGX Nifty is down 260.50 points or 1.5 percent at 17,071.50 today.

Rupee plunges further

Indian rupee on Monday touched a fresh record low against US dollar tracking losses in domestic as well as global equities markets. The home currency opened at 81.55 and touched an all time low of 81.55 a dollar. At 9.20am, the home currency was trading at 81.52 a dollar, down 0.64 percent from its previous close of 80.99. The currency has fallen in eight out of nine trading sessions and lost around 2.28 percent in this period.

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RBI to hike rates again

The Reserve Bank of India is set to raise interest rates again this week on Friday with a slim majority of economists in a Reuters poll expecting a half-point hike and some others expecting a smaller 35 basis point rise. The RBI has lagged many of its global peers, despite inflation sticking above the top end of its target range of 2-6 percent all year. It has raised rates in three separate moves since May, one of them unscheduled, totalling 140 basis points and taking the key repo rate to 5.40 percent.

Also read: RBI policy meet, F&O expiry to keep market volatile; Nifty may find support at 17,150: Experts

Fed’s Powell vows to raise rates to beat inflation

Federal Reserve Chair Jerome Powell vowed that he and his fellow policymakers would “keep at” their battle to beat down inflation, as the US central bank hiked interest rates by three-quarters of a percentage point for a third straight time last week and signalled that borrowing costs would keep rising this year. Powell was blunt about the “pain” to come, citing rising joblessness and singling out the housing market, a persistent source of rising consumer inflation, as being likely in need of a “correction”.

Japan’s factory activity expands at slowest pace in 20 months

Japan’s factory activity growth hit a 20-month low in September as firms struggled with a global slowdown and pressure from high energy and raw material prices was exacerbated by a weak yen.

The au Jibun Bank Flash Japan Manufacturing Purchasing Managers’ Index (PMI) slipped to a seasonally adjusted 51.0 in September from the prior month’s final of 51.5. The headline figure marked the slowest expansion since January 2021, although it stayed above the 50 mark that separates contraction from expansion.

All sectors trading in the red

Among the sectors, the auto, realty, metals and power are down 3-4 percent each while financial, healthcare and oil & gas are down 1-2 percent each. The BSE midcap and smallcap indices are down 3 percent each.

Technical View

Sameet Chavan, Chief Analyst-Technical and Derivatives, Angel One

Weakness in global markets and the upcoming key domestic data have put a sense of tentativeness among market participants. As we have witnessed a decisive breach below the major support zone in Nifty, one should not rule out the possibility of it testing the immediate swing low of 17150 odd zone, while the sacrosanct support lies at the psychological mark of 17000. On the flip side, a series of resistances could be seen starting from 17500 to 17800 in the comparable period.

Considering the recent price action, traders are advised not to carry aggressive overnight bets for a while and should adapt the strategy to follow one step at a time and respect levels on either side. The unfavourable global scenario was one of the major catalysts for the fall last week; hence, one should stay abreast of global developments and the upcoming key domestic macro data.

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