Indian markets witnessed the second worst week of 2019 as benchmark indices fell by about 2 percent for the week ended August 2. The Nifty50 fell 2.54 percent, its worst weekly performance since May 10 when the index was down by about 3.7 percent.
There has been persistent selling by foreign investors that has pulled out more than Rs 6,000 crore from the cash segment of Indian equity markets. Also, there are muted corporate results, signs of weakness in economic growth as reflected by core data and, on the global front, the commentary from the US Fed and fresh concerns over trade war between the US and China.
The S&P BSE Sensex managed to reclaim its crucial level of 37,000. However, for the week, the index fell by about 2 percent. The broader markets, especially the small caps, witnessed fierce selling pressure.
The S&P BSE Smallcap index plunged by 4.3 percent for the week ended August 2. The S&P BSE Midcap index was down 2.2 percent to 13,546, a level was last seen in February 2017.
More than 400 stocks in the top 500 companies of India Inc. recorded negative returns for the week ended August 2. Out of 419 stocks, 59 stocks in the S&P BSE 500 index fell in double digits.
Out of 59 stocks which dropped more than 10 percent, 14 stocks saw a decline of 20-50 percent which includes names like Sadbhav Engineering, Indiabulls Housing Finance, Dish TV, Indiabulls Real Estate, Vodafone Idea, Care Ratings, and Coffee Day Enterprises, etc. among others.
In the coming week, apart from corporate earnings, investors would watch out for the outcome of the monetary policy committee (MPC). Most experts see a 25 bps rate cut from the Reserve Bank of India (RBI) to lift growth in Asia’s third-largest economy.
“Considering the current economic slowdown, muted earnings and stretched valuation — we would continue to remain cautious until there are meaningful signs of revival in corporate earnings. However, the upcoming key events would have a bearing on Indian markets and would dictate the trend,” Ajit Mishra, Vice President (Research) – Religare Broking, told Moneycontrol.
“On the domestic front, the RBI monetary policy would be one of the key events for investors and traders. Given the comforting inflation data and decelerated IIP growth, the street would be expecting at least a 25bps cut by the RBI,” he said.
The Nifty50 failed to close above 11,000 levels for the week ended August 2. It is still trading below its crucial 200-days moving average placed at 11,154.
The weekly price action formed a sizable bear candle carrying a lower high–low, indicating prolonged correction on the breach of the 200 days EMA (11,285).
The index formed a bearish candle on the weekly charts. It looks like Nifty has formed strong support near 10,848 zone and resistance is coming near 11,150-11,300 zone.
“Going ahead formation of higher high-low supported by a decisive close above the previous session high would be the first sign of a pause in ongoing downward momentum,” Dharmesh Shah, Head – Technical – ICICI Direct, told Moneycontrol.
“We expect the index to hold the current week low (10848) and witnessed a meaningful pullback towards 11300 in the coming weeks. So we advise traders to refrain from creating aggressive short at current levels,” he said.
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