Dear
Trader…
The 30-stock S&P BSE ended with declines at 79924, losing
427 points or 0.53%. The broader NSE Nifty future declines 142 points or 0.58%
to end at 24342.
Retail investors, who got used to seeing their portfolio
going up almost every day, were in for a rude shock as smallcap and midcap
indices recorded their worst day in more than a month before recovering some of
the losses.
The sell-off in Nifty was led by a 7% decline in Mahindra
& Mahindra (M&M) where investors see price cuts in XUV700 as a sign of
weakening demand in the car industry. Other top blue-chip losers include
Hindalco, Tata Steel, TCS and HCL Tech.
Among sectoral indices, auto, media, metals and PSU banks
were the worst hit.
Here are the key factors behind today’s fall in Sensex &
Nifty: –
1) Profit-booking – Following a 12% return
year-to-date in Nifty and even higher gains in small and midcap stocks,
investors have been looking for opportunities to take some profits off the
table. Analysts point out that bulls have been showing signs of fatigue even as
all dips eventually get bought into. After hitting new record highs every other
day, bulls are looking for fresh triggers to take the market higher.
2)
Fed factor – Investors have also taken note of
Federal Reserve Chairman Jerome Powell’s overnight statement that a rate cut is
not appropriate until there is greater confidence that inflation is moving
sustainably toward 2%.
Fed has also expressed concern that holding
interest rates too high for too long could jeopardize economic growth. The
inflation data in the US expected on Thursday will determine Fed action in
September.
4)
Valuations – Whether you agree with the theory
that Sensex is overvalued at 80,000 or not, many individual stocks have been
trading at elevated valuations as retail, domestic mutual funds, and FIIs have
been on a buying spree in the post-election phase. Many market veterans have
been warning of froth, if not bubble, building up in large pockets of the
Street. The brokerage finds the valuations of PSU stocks to be quite bizarre
when compared with their fundamentals.
5)
Earnings expectation – Investors are also
finetuning their portfolios in sync with the expectations from the June quarter
earnings where the growth momentum is likely to slow down as most of the margin
expansion story has already played out in the preceding quarters.
6)
Overbought market – On technical charts, Nifty
has been giving lethargic formations like small-bodied candles and testing the
patience of both sides of the trend. Besides, around 86% of NSE500 stocks have
been trading above the 200-DMA level, which also indicates overbought
conditions.
Nifty futures opened at 24498 points against the previous
close of 24485 and opened at a low 24212 points. Nifty Future closed with an
average movement of 291 points and decline of around 143 points and closed 24342
points…!!
At the start of intra-day trading, August gold opened at Rs.72530,
fell from a high of Rs.72883 points to a low of Rs.72500 with a rise of 450 points,
a trend of around Rs.72851 and sept. Silver opened at Rs.93073, fell from a
high of Rs.93626 points to a low of Rs.92767 with a rise of 582 points,
a trend of around Rs.93578.
Meanwhile,
Both domestic and global factors continue to
drive the market momentum. Currently, consumption sectors like FMCG and auto
are leading the gains, buoyed by progress in the monsoon and kharif sowing.
Technically, the
important key resistances are placed in Nifty future are at 24342 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 24373 – 24474 levels. Immediate support is placed at 24240 – 24170 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
