16th August, 2013 – Comments by Amar Ambani, Head of Research, India Infoline
There was blood-bath on Dalal Street as capitulation set in since the onset of trade today. The move was precipitated by a weakening rupee and worsening economic data.
The Indian rupee breached the psychological 62 mark against the dollar as steps taken by the government and the Reserve Bank fail to bear fruit. The Indian unit has surpassed its previous all-time low of 61.80 to the greenback.
The bear grip was so fierce that none of the sectoral indices on the Bombay Stock Exchange ended in positive terrain. Interest rate sensitives were the worst hit after July inflation came in higher-than-expected at 5.79%, virtually ruling out a policy rate cut.
The Bank Nifty once again collapsed below the psychological 10,000 mark, falling 450 points to 9,450.85. Realty, metals, capital goods and consumer durables stocks were the other major laggards. Even midcap and smallcap stocks were badly beaten down.
Sentiment took another hit after Moody’s downgraded the credit assessment of three banks – Bank of Baroda, Canara Bank and Punjab National Bank.
The Sensex finally closed at 18,598, down 769 points, while the Nifty shut shop at 5,507, down 234 points over Wednesday’s close. The Nifty registered its biggest percentage loss since September 22, 2011 while the Bank Nifty recorded its biggest fall since July 2009.
The advance-decline ratio favoured the bears. On the Bombay Stock Exchange, 1,582 stocks declined against 729 advances, while 139 stocks remained unchanged.
Volatility, as measured by India VIX, spiked by 26% to close at 23.64. It hit a day’s high of 22.76 and low of 18.07.
For the week, the indices shed all their gains, slipping 1% each. In the first four sessions of the week, the Nifty managed to recoup nearly 270 points, or 4.8%, since its August 7 lows.
So, how with markets trade next week? Amar Ambani, Head of Research at IIFL, expects market participants to look towards international cues for further direction given that the results season is behind us. “In the US, the Federal Reserve would release minutes of the FOMC meeting next week. Technically, the Nifty has reversed from its 38.2% retracement level, which also coincides with the intermediate rising trendline resistance levels. If the Nifty breaches the 5,470 mark on a closing basis, selling pressure could accentuate,” he stated.