Markets end in red; Sensex falls for 3rd day in row, IT stocks worst hit

Market


Indian markets corrected steeply on Tuesday tracking feeble Asian counterparts as global investors turned cautious after strong US services data sparked bets for higher terminal rates by Federal Reserve. Also, at home, investors were on wait-and-watch mode for RBI’s December monetary policy outcome which is scheduled to be announced tomorrow. Surprisingly, the Indian rupee reached its highest level since November 7th against the US dollar due to suspected Yuan-Rupee carry trade unwind and corporate dollar outflows. Sensex continued its third consecutive day fall. 

Sensex plunged by 208.24 points or 0.33% to settle at 62,626.36. While Nifty 50 tumbled by 58.30 points or 0.31% to close at 18,642.75. IT and metal stocks were the worst hit, while notable downside was also seen in banking, consumer durables, and healthcare stocks. In the broader market, midcap stocks took most of the beating as investors booked profits after the previous week’s gains. India’s volatility index rose over 2%.

On BSE, the IT and Metal indices dipped by 421.16 points and 356.05 points respectively.

Stocks like Hindustan Unilever, Ultratech Cement, Power Grid, Nestle, and Axis Bank were the top 5 bulls. While stocks like Tata Steel, Dr. Reddy’s Lab, SBI, Bharti Airtel, ICICI Bank, IndusInd Bank, TCS, and Tech Mahindra were top underperformers.

Rupak De, Senior Technical Analyst at LKP Securities said, “Investors mostly remained on the sidelines as they preferred waiting for the RBI monetary policy announcement.”

RBI is set to present December 2022 monetary policy tomorrow. Expectations of 25-35 basis points are on the table instead of a fourth 50 basis points hike in this coming policy. So far in FY23, the repo rate has increased by 1.9% to 5.9%.

Further, Vinod Nair, Head of Research at Geojit Financial Services said, “Bears kept pushing domestic indices lower amid unfavourable global cues, with significant selling in metals and IT stocks. The mood was dampened by renewed concerns over policy tightening by the Fed in response to strong economic data out of the US. However, while easing COVID curbs in China benefited the demand outlook, fresh sanctions on Russian oil further added volatility to global oil markets. Investors at home await the RBI policy meeting tomorrow, which is expected to slow the pace of rate hikes, in light of easing food prices.”

Meanwhile, the Indian rupee closed at a 1-month low of 82.6150 against the US dollar compared to their previous day’s print of $81.79 per dollar.

On the rupee, Anindya Banerjee, VP – Currency Derivatives & Interest Rate Derivatives at Kotak Securities said, “Once the spot crossed 82, stops may have been triggered by importers and bank dealers and that accentuated the rise. USDINR forward premium is trading at the lowest levels since 2011 and low forward premiums are hurting dollar supply. It is making carry trade unviable and also reducing exporter hedging. At the same time, it is making the Rupee vulnerable to global shocks.”

Banerjee added, “Indian Rupee has become one of the weakest currencies across a broad basket of currencies on a year-to-date basis. However, over the near term, we expect central bank intervention to emerge at higher levels and as a result, a range of 81.50 and 82.60 may unfold over the near term.”

On Nifty 50, Rupak De said, the benchmark found support around the previous low before closing a bit higher. The trend may remain sideways as long as the index remains within the bands of 18600-18800. Any decisive move on either side will induce a directional move.

On the other hand, Shrikant Chouhan, Head of Equity Research (Retail), Kotak Securities, revealed that in the past we have seen investors turning cautious ahead of a key event and booking some profit to avoid getting caught off guard. If the rate hike is above the street expectations, investors may press the panic button, which could accelerate the selling pressure.

 

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.


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