Today’s Action:
Frontline indices resume struggle; Nifty experiences distribution, breaches 50-DMA.
Daily Market Review:
After providing a breather in yesterday’s session, bears were back in business today.
Selling pressure escalated as the day progressed, leading to 0.9% and 1% cuts in the Sensex and the Nifty, respectively.
The Indian stock market has come under selling pressure in recent times amid weakening macro conditions. Consistently rising fuel prices and a depreciating rupee pushed the country’s 10-year bond yield to 7.87%, the highest level in about 3.5 years. Amid inflation concerns, market participants are fearing a rising interest rate environment in the country.
To keep a check on fuel prices, the Indian government may consider reducing excise duty on fuel. This will negatively impact tax collections, which have already been affected following the introduction of GST.
To provide temporary relief to consumers, the government could even ask oil management companies to absorb further price hikes. Shares of oil marketing companies were under pressure today and sold off 4-8%.
In the broader market, Nifty Midcap and Smallcap indices gave away early gains and slipped into negative territory owing to the late sell-off in key composites. Nifty Midcap and Smallcap lost 0.6% and 0.5%, respectively.
Barring Nifty PSU Bank (+2.7%), all the sector indices had a terrible session, with Metal (-3.7%), Media (-1.3%) and Realty (-0.9%) being the leading losers.
Coming to the market breadth, losers dominated winners in a ratio of 3:2.
MarketSmith India’s IND 47 index, our proprietary list of top 47 stocks in chart and fundamental characteristics, lost 0.1% today, faring relatively better than the market.
Talking about market direction, the Indian market remains in an Uptrend Under Pressure. Today’s loss came on higher volume on Nifty, resulting in a distribution day on the index. The distribution day count now stands at four on the Nifty and two on the Sensex.
For the first time since April 11, the Nifty closed below its key support of 50-day line. The index is now down 6.6% from its yearly high.
Broader indices, on the other hand, have corrected 15-20% from their January highs. Both Midcap and Smallcap indices have seen massive selling pressure in the past five weeks and are currently in a Downtrend.
Current Outlook:
– Be cautious with any new purchases
– Form a defensive game plan for your portfolio
– Stay disciplined and exercise sound sell rules
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