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Bloodbath on Dalal Street: Why Sensex is down 1,000 points today

Indian stock markets fell sharply in afternoon trading today, with Sensex falling more than 1,000 points, while Nifty remained below 17,600 levels. Analysts attributed the jitters in Dalal Street to weak global signals about fears of aggressive Fed tightening in the face of warnings of a global recession. Rating agency Fitch lowered India’s GDP growth forecast for the current fiscal year from 7.8% to 7% earlier this week amid a slowdown brought on by global economic stress, increased inflation and tighter monetary policy from the RBI.

Indian equities outperformed their peers on expectations of strong domestic economic growth, but analysts say it is difficult to sustain the decoupling from the global trend.

“In this challenging environment, it would be difficult for India to sustain the decoupling of the global trend, which has been a recent pattern in India. In addition, FIIs have stopped their ongoing purchases and switched sellers, although this has yet to be done is not a trend,” said VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services.

Foreign investors sold $173 million worth of Indian stocks on Thursday, breaking a seven-day buying streak. IT stocks were under pressure and Wipro, Infosys, TCS and Tech Mahindra fell between 2% and 4%. The heavyweight RIL fell more than 2%.

“Indian equity markets are witnessing some selling pressure after a long period of resilience. Global signals continue to be weak as there is a sharp rise in the dollar index and US bond yields following US inflation data. We may continue to outperform, but we cannot remain isolated for long. Global markets are nervously looking ahead to the Fed meeting as there is talk of a rate hike of 100 bases, while a rate hike of 75 bases has already been discounted,” said Santosh Meena, Head of Research, Swastika Investmart Ltd.

See also  Sensex Plunges 1,000 Points, Nifty Crashes Below 17,000 In Bloodbath

“Technically, Nifty faces resistance at the 18,100 level and has slipped below the 20-DMA of 17700, which could lead to some more selling pressure, with 17470-17400 being an immediate demand zone and 17150 being a sacred support level. Bank Nifty is outperforming, but yesterday it ended at a day-long low after hitting a new all-time high, which is a bit disappointing. On the other hand, 40900-40700 is an immediate demand zone; below that, 40270 is the next key support level,” he added.

All eyes are on the Fed, which has already instituted two consecutive 75 basis point hikes and is expected to make a jumbo hike next week.

VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services, said the Indian market is beginning to show signs of fatigue. “Overall, the biggest concern right now is that the Fed could oversteer the economy and end up raising interest rates too fast, sending the US economy into a sharp recession. There are talks that the Fed’s final interest rate will rise to 4.25%. Soaring interest rates, rising bond yields and rising dollar are negative for equities.”

Investors can take a wait and see approach until the Fed meeting on Sept. 21 is over, he suggested. (with desk entrances)

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