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BSE Sensex, Nifty falls 2 percent amid weak European markets

By FnF Correspondent | PUBLISHED: 22, Sep 2015, 15:16 pm IST | UPDATED: 22, Sep 2015, 16:01 pm IST

BSE Sensex, Nifty falls 2 percent amid weak European markets Mumbai: India's stock markets fell 2 percent on Tuesday, tracking a steep fall in European equities and as sentiment turned cautious ahead of the expiry of monthly derivatives contracts later this week.

The S&P BSE Sensex cracked over 600 points on Tuesday to break below 26,000, tracking selloff in European markets triggered by a slide in commodity prices. The 50-share Nifty slipped 165 points to close at 7,812.

The 30-pack index shed 660 points from day's high to close 541 points, or 2.07 per cent down at 25,661.84. The broader 50-share NSE Nifty also cracked in late trade to end 165.10 points, 2.07 per cent lower at 7,812. The losses on the benchmark indices were led rate sensitives

Shares of Hindalco and Vedanta were the top two lossers on the BSE benchmark, shedding 6 per cent each.

The sentiment on the Street was weak, as 26 out of 30 BSE Sensex stocks ended day with losses. India VIX, the fear gauge, closed 11.92 per cent higher at 20.34 indicating high volatility for the next 30 days.

Among the sectoral indices BSE Metal was the top sectoral losser, closing 4.24 per cent. Hindalco and Vedanta were the top two contributers to the losses on the index. "Interest is missing primarily because of a truncated week and the F&O expiry day after tomorrow. Volatility will be high plus 8,000 levels (on the NSE)," Gaurang Shah, vice president at Geojit BNP Paribas, said.

European markets plunged between 1 per cent and 2 per cent, led by miners as copper prices slid on worries over slower demand from China, while the dollar hit its highest in almost two weeks after the US Federal Reserve officials signalled that US interest rates could still rise this year, said a Reuters report.

The pan-European FTSEurofirst300 stocks index fell 1.6 per cent. An index of mining shares dropped 3.8 per cent after copper retreated 2.1 per cent. US equity index futures were last down 0.9 per cent at 02:20 pm (IST), suggesting the S&P500 would open lower.

The 7,900 level on Nifty was crucial support for the index, and a breach of that indicates further downside in the next few days. Traders who are long, should cut their exposure as the momentum, atleast for the short term has shifted downwards.

Based on technical charts, Nifty reverted from fairly key levels. The 7,930-7,950 levels should have held on. "For the next one-and-a-half hours, it is a good idea to throw the kitchen sink at the market and get short, because this kind of decline generally happens when the downtrend is resuming," says Ashwani Gujral, Fund Manager, Ashwanigujral.com.

"Unless we can turn from 7,800, chances are this fall might lead to an even bigger fall, which could take the index towards 7,500. We have got puts and cut our long positions. The market has weakened substantially and we have not seen big follow through at higher levels in the last couple of days ," he added.

The momentum which was there over the last three to four sessions now seems to be fading, say experts. The chart patterns indicate that, the index could well retest 7700-7680 levels in the short term.

"The 7,900 level on the Nifty should not have been broken under any circumstances for the momentum to remain intact. There is a higher chance of Nifty moving towards 7,800 rather than 7,900. Any upward move towards higher levels will be sold into," says Sandeep Wagle, Founder & CEO, PowerMyWealth.

"I do not even see 7,900 being tested and most likely will be sold into. I would talk of a move towards 7,700-7,680. The market has very clearly reversed and the hourly charts are showing a very clear breakdown which should follow over the next few days," he added.

The Europe factor:

Markets cracked sharply in trade soon after the European markets opened, which extended in the last one-and-a-half hours of trading.

"The fall in the market was largely after the European markets opened. The ECB pledged to sustain or like to maintain the inflation target of 2 per cent, which also weighed on sentiments. It simply means that the reaction has come into the euro government bonds and as a result of which the selloff has taken place in equity," says Deven Choksey, MD, KR Choksey Investment Managers Private.

"Now, this is one of the reason which one is attributing it to, how much it has reflected into our markets and how much equity selling has taken place due to which in our markets, difficult to quantify at least at this point of time," he added.

But I do believe that given the kind of situation in which we are right now, every fall towards the support 7,450-7,500 on the Nifty, should be used as buying opportunity, added Choksey. "Officials at the European Central Bank have been stressing that monetary policy in the euro zone will remain loose for some time. Governing council member  Ewald Nowotny said on Monday ECB rates would stay low as long as growth did," said a Reuters report.

"This divergence between the policy outlooks of the Fed on the one hand and the ECB and Bank of Japan on the other helped push the dollar to its highest point since Sept. 10 against a basket of currencies," added the report.