Weak Global Cues Drag Markets Down

Weak Global Cues Drag Markets Down
Yagnesh Kansara - 11 June 2020

Mumbai, June 11: The Indian stock market witnessed the brutal selling after many sessions of sustained rally as subdued economic outlook from the US Federal Reserve and worries of a second wave of COVID-19 cases weighed on investors’ sentiments. The US Fed expects -6.5 per cent contraction in US GDP for 2020 and interest rate to remain zero till 2022. Banking index was down ~2.7 per cent as the investors are also cautious over the Adjusted Gross Revenue (AGR) case related to the Telecom sector, given the higher exposure of banks to Vodafone Idea.
The selling in the form of profit taking in the market was also due to the weekly futures and options expiry, which led to biggest single-day drop in three weeks. The NSE Nifty 50 index ended 214.15 points or 2.1 per cent lower at 9,902.The S&P Sensex was down by 708.68 points or 2011 per cent at 33538.37 points. All sectoral indices also ended in red.
Among major stocks, Reliance, SBI, Bharti Infratel and ICICI bank fell the most and dragged the market down. Volumes on the NSE were lower than normal for an expiry day. Telecom, Financials, Pharma, Auto and Metal stocks sold off while select NBFC stocks gained.
Going ahead investors will keep a close eye on SC AGR hearing, crude oil prices, geopolitical issues and development related to economy and coronavirus.
Deepak Jasani, Head, Retail Research, HDFC Securities said, “Stock markets around the world retreated Thursday as fears over a second wave of coronavirus infections and a gloomy economic outlook from the US Federal Reserve distressed investors. Asian markets mostly fell in early trading Thursday, following losses on Wall Street after Fed Chairman Jerome Powell said the economic recovery will be “a long road.”
In the US new jobless claims are expected to reflect continuing layoffs on Thursday, even as reopening proceeds. “Technically, the Nifty has fallen again after showing a brief upward correction on Wednesday. 9707 could be the next support while 9944-10021 could be the next resistance for the Nifty in the near term” Jasani said.
Ruchit Jain, Senior Technical and Derivatives Analyst, Angel Broking, said, “On the weekly F&O expiry day, Nifty started trading on a flat note. But the indices crept lower throughout the day and ended tad above 9900, registering a loss of over 200 points. After a minor pullback in the first half an hour, the indices corrected gradually during the day towards the 10000 mark. The indices did not see any swings immediately, but it followed the global cues which were trading in deep cuts and as a result, Nifty breached the 10000 mark and corrected further to end the day around 9900.”
In last few sessions, we had seen that any dip in the range of 9900-10000 was being bought into. However, the market breadth was negative today and broader markets witnessed sell-off thus jeopardizing the support of 9900, Jain said.
The coming session will be a crucial as considering the weekly close and also how market reacts around the support of 9900. He emphasised, “A sustainable move below the same could then lead to a decent profit booking in stocks as we have seen some good up-moves in the recent past. The levels that Nifty could approach then are seen around 9800 followed by the ‘20 DEMA’ around 9700. On the flipside, 10050-10100 will now be seen as immediate resistance on pullback moves.”