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Indian stock markets fell sharply today in afternoon trade, with Sensex falling over 1,000 points while Nifty was below 17,600 levels. Analysts attributed the nervousness on Dalal Street to weak global cues on fears of aggressive tightening by the Fed in the face of warnings of a global recession. Rating agency Fitch earlier this week cut India’s gross domestic product growth forecast for the current fiscal year to 7% from 7.8%, amid a slowdown triggered by global economic stress, elevated inflation and tighter RBI monetary policy.
Indian equities had outperformed peers on expectations of strong domestic economic growth but analysts say it difficult to sustain the decoupling from global trend.
“In this challenging environment it would be difficult for India to sustain the decoupling from the global trend which has been a recent pattern in India. Moreover, FIIs have halted their sustained buying and have turned sellers, though this is not yet a trend,” said VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services.
Foreign investors sold a net $173 million worth of Indian equities on Thursday, snapping a seven-day long buying streak. IT stocks were under pressure with Wipro, Infosys, TCS and Tech Mahindra down between 2% and 4%. Market heavyweight RIL was down over 2%.
“Indian equity markets are witnessing some selling pressure after a long period of resilience. Global cues continuously remain weak as there is a sharp surge in the dollar index and US bond yields post US inflation numbers. We may continue to outperform but we can’t remain in isolation for a long time. Global markets are looking nervous ahead of the Fed meeting because there is talk of a 100 basis rate hike while a 75 basis rate hike was already discounted,” said Santosh Meena, Head of Research, Swastika Investmart Ltd.
“Technically, Nifty is facing resistance at the 18,100 level and it has slipped below its 20-DMA of 17700 which may lead to some more selling pressure where 17470-17400 is an immediate demand zone then 17150 is a sacrosanct support level. Bank Nifty is outperforming but yesterday, it ends at a day’s low after hitting a fresh all-time high which is a little disappointing. On the downside, 40900-40700 is an immediate demand zone; below this, 40270 is the next important support level,” he added.
All eyes are on the Fed, which has already instituted two consecutive 75-basis-point hikes and is widely expected to carry out a jumbo-sized hike next week.
VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services, said Indian market has started showing some indications of fatigue. “Globally, the major concern now is that the Fed might oversteer the economy and end up raising rates too much too fast, pushing the US economy into a sharp recession. There are talks of the terminal Fed rate rising to 4.25%. Sharply rising rates, rising bond yields and rising dollar are negatives for equity.”
Investors may adopt a wait and watch attitude till the Fed meeting is over on 21st September, he suggested. (With Agency Inputs)
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