Today’s Action:
Nifty holds above 50-day line; broader market sell-off intensifies.
Daily Market Review:
For the second day in a row, a positive opening on Nifty ended in a loss, as selling pressure mounted on Dalal Street.
While benchmark composites managed to limit losses at 0.3%, the carnage in midcap and smallcap stocks rubbed salt on wounds of investors.
The Nifty Midcap and Smallcap received a thrashing once again, as they shed 1.3% and 2.5%, respectively. The Nifty Smallcap closed just 2% above its 52-week low today.
Ahead of the Reserve Bank of India’s interest rate decision tomorrow, the market seems to have prepared itself for a rate hike, which if happens, would be the first in more than four years. Even if status quo is maintained, the central bank’s commentary is more likely to turn hawkish given rising inflation concerns.
Amid concerns of monetary policy tightening, the Indian government’s 10-year bond yield has been on the rise in recent times. It closed at 7.84% today.
The overall market breadth was extremely bearish, as decliners outnumbered gainers in a ratio of 4:1 on the NSE.
On the sectoral front, Nifty Media (-2.1%), IT (-1.4%) and Pharma (-1.1%) succumbed to selling pressure. Nifty Financial Services took exception and closed 0.1% higher today.
Our proprietary list of leading stocks, the MarketSmith India IND 47 index tumbled 3.3% on account of sell-off in smallcap stocks.
India’s services sector slowed down in May, going by Services PMI reading of 49.6. A figure below 50 indicates contraction and the reading has fallen below 50 for the first time in three months.
Coming to market direction, the Indian market remains in an Uptrend Under Pressure for now. Frontline indices escaped distribution today, as volumes were lower than the previous session. The distribution day count is unchanged at four on both the Nifty and Sensex. Both indices are trading above their 50-day lines, although the gap has reduced to about 1%.
While key indices are holding up well, the year so far has been painful for broader market indices. The midcap and smallcap benchmarks have sold-off 17% and 24% from their January highs and are currently in a Downtrend.
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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