Dalal Street back on skid row

The red flag was there, but the bulls didn’t spot it.

Foreign investors never squared up their short positions in Bank Nifty as equities rallied in the past few sessions, says Siddharth Bhamre, head of derivatives at Angel Broking.

That, along with fresh weakness in the rupee which saw it fall to 56.3/$ intraday, is likely to weigh on markets going forward, he assesses.

“The tepid response which global markets gave to Greece outcome and the fresh concerns on Spain, which is a bigger problem, can cause the Nifty to retest recent lows of 4800,” Bhamre believes.

In short, it may be back to skid row for equities – for now.
The market may witness follow-through selling in the coming sessions due to the lack of a rate cut and the downgrade by Fitch Ratings, said Deepak Jasani, head of retail research at HDFC Securities.

“We may see some short-term foreign investor outflows from those who had bought over last few days in anticipation of rate cuts in India.”

The Nifty lost 74.80 points or 1.46% and the Sensex 1.44% or 244 points at 16705.83 on Monday.

The expectation was that since China had cut rates, India would do too, said Satish Ramanathan, head of equities at Sundaram Mutual Fund.

“So the market showed some disappointment when the central bank decided to leave rates unchanged.”

Meanwhile, Europe’s financial crisis deepened and enveloped Spain, raising pressure on German chancellor Angela Merkel at a meeting of world leaders to shift her stance on shielding the global economy.