Today’s Action:
Sensex witnesses distribution day; broader market sell-off continues.
Daily Market Review:
A strong opening at the bourses was turned upside down as India’s frontline indices ended the day 0.6% lower.
While both the Nifty and Sensex managed to limit their losses, it was a completely different story in the broader market.
The Nifty Midcap and Smallcap indices became victims of massive selling pressure once again, shedding 1.1% and 2.8%, respectively.
Ahead of the Reserve Bank of India’s interest rate decision on Wednesday, market participants seem to have prepared themselves for a rate hike. Even if interest rates are not hiked, the central bank is more likely to turn hawkish given rising inflation concerns.
Further, the market seems to be pricing in the negative impact of rising crude oil prices on the government’s fiscal condition. This could put additional pressure on the quantum of government spending, which was expected to be strong ahead of the 2019 general elections.
The Indian government’s 10-year bond yield made a high of 7.9% in today’s session, amid concerns of monetary policy tightening.
The overall market breadth painted a gloomy picture with losers outpacing gainers in a ratio of 9:2 on the NSE.
Barring Nifty IT (+0.3%) and Metal (+0.2%), all sector indices were down, with Nifty Realty (-3.3%), Bank (-1.6%) and Financial Services (-1.6%) losing the most.
Our proprietary list of leading stocks, the MarketSmith India IND 47 index paid the price of high exposure to smallcap stocks. It slipped 2.4% in today’s session.
Coming to market direction, the Indian market remains in an Uptrend Under Pressure for now. Today’s fall in the Sensex came on greater volume than the previous session, thereby qualifying as a distribution day. With this, the distribution day count has now climbed to four on the Sensex. On the Nifty, it is unchanged at four. Both indices are yet trading above their 50-day lines, although the gap has reduced to 1-1.5%.
Also, the market continues to display divergence with broader market indices facing tremendous selling pressure. The Nifty Midcap and Smallcap indices have corrected 15.6% and 22.5%, respectively, from their January highs.
Current Outlook:
– Be cautious with new purchases.
– Form a defensive game plan for your portfolio.
– Stay disciplined and exercise sound sell rules.
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