Weak Asian cues, US Fed's hawkish comment on interest rate hike trigger 1% fall in markets

FPJ Web DeskUpdated: Thursday, January 27, 2022, 05:22 PM IST
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At close, the Sensex was down 581.21 points or 1 percent at 57,276.94./Representative image |

The stock market closed weak marked with volatility throughout the day. Markets are down mainly on the hawkish Fed outlook. Jerome Powell, Chairman of the Federal Reserve, signalled a rise in interest rates in March and predicted the possibility of an unexpectedly aggressive policy tightening.

After a gap-down opening, the Nifty50 index slipped lower and made a low at 16,866.75 in the morning session but in the second half, there was a sharp recovery in the index from the day low and it closed with a fall of 1 percent. Banknifty settled positively at 37,982.10 levels with 0.73 percent gains in a day ahead of monthly expiry.

At close, the Sensex was down 581.21 points or 1 percent at 57,276.94. The broader Nifty was down 167.80 points or 0.97 percent at 17,110.20. About 1,447 shares have advanced, 1,832 shares declined, and 90 shares are unchanged.

On the sectoral front, the Nifty IT dragged by 3.5 percent followed by Nifty Realty, Pharma, while Nifty PSU BANK have contributed 4.3 percent gains in the index. Stocks like Maruti, SBIN, Axis Bank, Cipla added more than 2 percent gains while HCL Tech, Tech Mahindra, Dr Reddy, Wipro were the prime losers for the day.

Shrikant Chouhan, Head of Equity Research (Retail), Kotak Securities Ltd., Key benchmark indices reacted to weakness in other Asian markets, which faced the heat of the US Federal Reserve's hawkish comment stating that they may go for more rate hikes this year. Investors fear that with foreign investors continuously pulling out funds from Indian markets, the rate hikes later in the year could further worsen the sentiment. Further, Russia-Ukraine standoff and rising oil prices are also major dampeners for the markets.

"The Nifty has formed a double bottom suggesting strong possibility of a fresh pullback rally from the current levels. The index has been consistently taking support near 16,900 and the momentum indicators also support a quick uptrend from the current levels. For the traders, 17,000 and 16900 are strong support levels and above the same, a pullback rally could lift the index up to 17,250-17,350 levels. On the flip side, below 16,900, uptrend would be vulnerable," Chouhan added.

Mohit Nigam, Head - PMS, Hem Securities said, "Benchmark Indices trimmed most of their losses during the trading session but ended their day in red. Traders failed to get any relief on a report that the Central Board of Direct Taxes (CBDT) has issued Rs 1.62 lakh crore income tax refunds to over 1.79 crore taxpayers till January 24, 2022 of the current financial year. On the technical front, the key resistance level for Nifty50 is 18,300 and on the downside 16,600 can act as strong support. Key resistance and support levels for Bank Nifty are 38,500 and 37,200 respectively."

Deepak Jasani, Head of Retail Research, HDFC Securities, said, "Cash volumes on a monthly expiry day touched an 8 expiry high suggesting heightened activity post the US Fed outcome and ahead of the Union Budget. Advance decline ratio was negative as broad market continued to witness profit taking post a volatile last week. Nifty has made a higher low compared to the previous day. In the near term 16998 could be a crucial support level, while 17278 could be a resistance. Whether a late pre-Budget rally will happen will depend on how the western markets behave today."

Sachin Gupta, AVP-Research, Choice Broking said, "Technically, the nifty index has taken an immediate support at Rising Trendline & 78.2 percent Retracement Levels of its prior rally on the daily chart. A momentum indicator Stochastic is also trading near oversold territory that suggests further reversal in the near term. At present, the Index has support at 17,000/16,900 levels while resistance comes at 17,350 levels. On the other hand, Bank Nifty has support at 37,600 levels while resistance at 38,500 levels."

Prashant Tapse, Vice President (Research) at Mehta Equities Ltd, said, "Nifty ended below 17,200 mark amid FOMC Chairman Jerome Powell's hawkish remarks that lifted US Treasury bond yields to 23-month highs and most importantly, allowed the dollar to gather strength. We suspect, bears will remain in full control as the pessimistic theme at Dalal Street is also surrounded on the backdrop of an anticipation of a populist budget ahead of five state elections. Nifty’s daily charts are still painting a bearish picture; downside risk seen at 16,401 mark. From a chartist standpoint, the technical landscape will improve considerably only above Nifty 17,389 mark. So, until Nifty’s 17,777 mark is resistance, volatility will be hallmark and the perma-bulls should strictly not assume any intraday strength as light at the end of the tunnel."

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