Dear
Trader…
Sensex settled at 73,878.15, down by 733 points or 0.98%
while the Nifty Future closed at 22551.50, lower by 222.45 points or 0.98%.
The market capitalisation of BSE-listed companies dropped by
a whopping Rs 2.53 lakh crore.Fear gauge India VIX also surged 9% to almost 15,
gaining for the 7th straight session.
Here are the key reasons that led to today’s bloodbath:-
1)
RIL, HDFC Banks lead debacle – The Indian
markets eroded their morning gains and fell to the day’s low dragged by RIL,
L&T, HDFC Bank, and Bharti Airtel among others. These stocks pulled down
the headline indices, the most in terms of their contribution to the respective
indices.
2)
Inflation fears – With inflation in the US,
surpassing market expectations for four consecutive months, inflationary
concerns have aggravated. In its May policy, the Fed acknowledged limited
progress toward its inflation goal and highlighted that the inflation path
remains uncertain. Markets expect US interest rates to stay higher for longer
and are pricing in just one rate cut in 2024.The NFP data from the US expected
later today is also a factor in today’s volatility.
3)
India VIX – India VIX, a measure of volatility
shot up by over 12% to 15.12 as a combination of factors played on the market
sentiments including Q4 earnings, ongoing election season and the timing of
interest rate cut by the US Fed now shifting even further.
4)
Higher-for-longer interest rates – The inflation
trajectory in the US has delayed the timing and magnitude of the season’s first
Fed rate cut. Investors are now beginning to doubt whether the Fed would be in
a position to go for rate cuts at all in the calendar year 2024 given the
recent disappointing progress in bringing inflation down.
5)
Pre-election jitters – Market speculations
related to the outcome of the Lok Sabha election results is also leading to
increased wild swings. volatility could rise even further as we inch closer to
the 4th June election results date.
Nifty futures opened at 22850.00 points against the previous
close of 22773.95 and opened at a low of 22470.00 points. Nifty Future closed
with an average movement of 418 points and a decline of around 222.45 points
and closed 22551.50 points…!!
At the start of intra-day trading, June gold opened at Rs.70678,
fell from a high of Rs.70804 points to a low of Rs.70553 with a decline of 133 points,
a trend of around Rs.70603 and May Silver opened at Rs.80299, fell from a high
of Rs.80300 points to a low of Rs.79810 with a decline of 24 points, a trend of
around Rs.79926.
Meanwhile,
Globally speculation surrounding the timing and
magnitude of the season’s first Fed rate cut, along with selling pressure from
FIIs in emerging markets, plays a pivotal role. The NFP data from the US
expected later today is also a factor in today’s volatility.
Geopolitical tension would make headlines again giving
traders an option to go short on markets. Overall, Q4 earnings are neutral to
positive and not so impressive. There are few reports that suggest that FIIs
have reduced holding in large caps stocks like HDFC Bank and ITC. For the short
term, the trend remains cautious and focus would be on fresh geopolitical
headlines.
Technically,
the important key resistances are placed in Nifty future are at 22551 levels,
which could offer for the market on the higher side. Sustainability above this
zone would signal opens the door for a directional up move with immediate
resistances seen at 22676 – 22808 levels. Immediate support is placed at 22505 –
22404 levels.
Past Performance is not an Indicator of Future Returns. The
securities quoted are for illustration only and are not recommendatory.
Investment in securities market are subject to market risks. Read Disclaimer
and related all the documents carefully before investing, mentioned on www.nikhilbhatt.in
