Tuesday, February 7, 2023
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Key factors behind market fall

New Delhi: After opening in the red zone after a hawkish comment from the US Federal Reserve, domestic stocks fell sharply towards the end of the session on Thursday.

The 30-stock Sensex finished 879 points lower at 61,799, while its broader counterpart Nifty50 finished at 18,415.

“The Fed has spooked the market by maintaining its aggressive tone as investors expected a softer approach following the release of better-than-expected inflation data. The market is now awaiting the decisions of the BOE and ECB, which will likely follow a half-point increase,” said Vinod Nair, Head of Research at Geojit Financial Services.

In the Sensex pack, Tech Mahindra, Titan, Infosys, HDFC and ITC were the biggest laggards, down about 2-4%. Tata Steel, HDFC Bank, TCS, SBI, ICICI Bank and Nestle also closed with cuts. On the other hand, only NTPC and Sun Pharma closed with a profit.

Sector-wise, the Nifty IT was down 2.14%, while the Nifty PSU Bank was down 2.10%. Nifty Financial Services and Nifty Metal also closed lower. In the wider market, Nifty Midcap50 was down 1.20% and Smallcap50 was down 0.61%.

The rupee fell against the US currency on Thursday as the dollar rebounded against its major peers to close at 82.76 against the dollar, down from 82.46 in the previous session. While February Brent futures fell 0.18% to $82.55 a barrel.

The market breadth was skewed in favor of the bears. About 2,152 fell, 1,405 rose, and 123 remained unchanged on the BSE. The market capitalization of all listed companies on the BSE fell by Rs 2.89 lakh crore to Rs 288.36 lakh crore.

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Factors behind the fall

The possibility of a longer rate hike by the US Fed, weekly M&A dues, weakness in US futures were some of the main factors weighing on sentiment.

Look:

While the 50 basis point rate hike by the US Federal Reserve was largely priced in at its last bimonthly FOMC meeting on Wednesday, investors were startled by the aggressive tone of Fed Chairman Jerome Powell.

Powell dashed investors’ hopes of a Fed pivot at any point as the Fed raised its projection of final interest rates from 4.6% previously to 5.1% from 4.6% previously. The Fed also expects a marginal increase in US GDP in 2023, further hurting sentiment.

“I think the Fed governor is not that far from that reality, which is that we are likely to see a significant economic slowdown in late 2023, a discernible increase in our employment rate that would pave the way for interest rate cuts in 2024,” said Taimur Baig , DBS Bank.

  • Weakness in world markets

Large Asian colleagues settled on Monday with major cuts. Japan’s Nikkei, Australia’s ASX 200, China’s Shanghai, Hong Kong’s Hang Seng and South Korea’s Kospi fell as low as 1.5% on the day.

European markets started trading on a weaker note. The German DAX, French CAC40, Dutch AEX and UK FTSE100 fell 1-2% throughout the day.

Even US stocks traded in the deep red. Dow Jones and technology-heavy Nasdaq futures signaled a gap-down opening and traded about 1% lower.

The weekly expiration of F&O contracts also dented market sentiment.

Major sectors with a heavy weight on the index, including technology, IT, metals, banking and financials, were under pressure.

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Amit Trivedi, CMT, technical analyst – Institutional Equities, Yes Securities said the sudden change in sentiment wiped out Nifty’s gains from the previous two sessions. After a negative start, Nifty remained in the red and eventually dropped into the 18,400 zone.

“During the recent recovery, Nifty failed to provide a close above the peak of a major bearish candle formed on Dec. 9. It represents the influence of the resistance game and therefore 18,700 remains the key resistance from a short-term perspective. The inability to Holding 18,400 could drag the index to 18300-18250 levels,” he said.

(Disclaimer: recommendations, suggestions, views and opinions of the experts are their own. They do not represent the views of Economic Times)

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