The stock market indices plunged on May 6, last day of trading this week over interest rate hikes post-RBI's unexpected repo rate hike. Markets were in southward direction right from the start of the trading session and selling intensified thereafter as rising crude oil prices reignited fears that inflation would pose a major challenge going ahead. The market is in a dilemma that in a rising interest rate scenario, a more hawkish stance by the RBI going ahead could hurt growth.
Metal and realty indices fell 3 percent each and IT index down 2 percent. Power index rose 0.5 percent. BSE midcap and smallcap indices fell 2 percent each.
At close, the Sensex was down 866.65 points or 1.56 percent at 54,835.58. The broader Nifty was down 271.40 points or 1.63 percent at 16,411.30. About 837 shares have advanced, 2,444 shares declined, and 105 shares are unchanged.
Among top Nifty losers were Divis Labs, Bajaj Finance, Shree Cements, UPL and Tata Motors. Hero MotoCorp, Tech Mahindra, Power Grid Corp, ITC and ONGC were among gainers.
Amol Athawale, Deputy Vice President - Technical Research, Kotak Securities Ltd., said, Technically, the Nifty is consistently trading below 200 day and 50 day SMA which is broadly negative. In addition, on weekly charts it has formed a long bearish candle, which supports further weakness from the current levels. On intraday charts the index is consistently holding a lower top formation that also supports short term weakness. For the traders, 16,300 would be the key support level. However, a quick intraday pullback rally is not ruled out if the index succeeds to trade above 16,300. Above the same, the pullback rally could continue up to 16,550-16,700. Below 16,300, selling pressure is likely to intensify, and below the same the Nifty could touch the level of 16,150-16,000.
Palak Kothari Research Associate Choice Broking, said, Technically, the Index has formed a Bearish candlestick pattern on a weekly chart which indicates selling pressure. Furthermore, the index has given closing below 61.80 percent. Retracement level of its previous up move from 15,671 to 18,115 level which suggest more selling in upcoming sessions. Moreover, Index has been trading below the Neck line of Head and Shoulder Pattern which is a sign of bearishness in the counter.The index has been trading below 21*50-Days Simple Moving Averages indicating southward direction for upcoming session.
The momentum indicators STOCHASTIC is trading with negative crossover on a daily Charts which indicates downside movement can be seen. The Nifty may find support around 16,300 levels, while on the upside 16,600 may act as an immediate hurdle for the index. On the other hand, Bank nifty has support at 33,800 levels while resistance at 36,000 levels, Kothari added.
Mohit Nigam, Head - PMS, Hem Securities said the Indian markets tumble on Friday after US and Asian markets declined. The focus today will be on US NFP data and unemployment rate. There might be further uncertainty in the markets due to a lot of global events happening. We believe Value investors may get decent opportunities to buy stocks at good valuations over next few weeks, Nigam said, adding, "Immediate support and resistance for Nifty are 16,200 and 16,800 respectively. Immediate support and resistance for Bank Nifty are 34,000 and 35,500 respectively".
Stock markets this week
Shrikant Chouhan, Head of Equity Research (Retail), Kotak Securities said, the Central bank actions kept domestic and global markets under pressure this week. In line with global markets, BSE Sensex and Nifty 50 index saw profit booking this week and was down by 4 percent. Broader indices like BSE Midcap and BSE Small cap also saw meaningful correction. Majority of sectoral indices were down between 3-6 percent. Sustained high inflation continue to drive monetary tightening measures from Central Banks across different countries.
This week markets reacted to interest rate increase by Central Banks like US Federal Reserve, Bank of England and RBI. In an off-cycle meeting, the RBI MPC hiked the repo rate by 40 bps to 4.4 percent and increased CRR by 50 bps to 4.5 percent. Amid rising interest rate, elevated crude oil price and high inflation, the markets will likely remain volatile. Further, stock specific action can be expected based on Q4 results and management commentary, Chouhan added.
Rupee plummeted 60 paise to close at 76.95 (provisional) against US dollar. Anindya Banerjee, VP, Currency Derivatives & Interest Rate Derivatives at Kotak Securities Ltd, said, USDINR spot closed 66 paise higher near 76.91 levels, after almost testing the previous all time high it scored on March 7th at 76.98. High oil prices, US Dollar Index at 20-year high, US 10-year yield above 3% and weak equity markets, the list of negatives for Rupee is pretty long. However, we suspect aggressive intervention from the RBI is keeping USDINR under 77. Next week, we expect USDINR to break above 77 levels and test 773.0 on spot. Broad range can be between 76.60 and 77.30 on spot.
Asian markets settle lower
In Asia, markets in Hong Kong, Shanghai, and Korea settled significantly lower, while Tokyo ended higher.
Exchanges in Europe were trading in the negative zone in the afternoon session.
Stock exchanges in the US had fallen sharply in overnight trade on Thursday.
''US markets witnessed a relief rally on Wednesday after FOMC meeting but it tumbled on Thursday due to more anxiety over rising interest rates,'' said Mohit Nigam, Head - PMS, Hem Securities.
Bank of England raises interest rates
The Bank of England raised its key interest rate to the highest level in 13 years on Thursday.
''A steep crash in the US stocks as the market evaluated the need for a higher rate hike to tame elevated inflation levels wounded global markets with heavy selling. The Bank of England while raising its interest rates, warned about a possible risk of recession, aggravating investor fears,'' said Vinod Nair, Head of Research at Geojit Financial Services.
Crude oil prices jump
International oil benchmark Brent crude jumped 2.20 percent to USD 113.3 per barrel.
Foreign institutional investors offloaded shares worth a net Rs 2,074.74 crore on Thursday, according to stock exchange data.