Monday's fall was the biggest single-day fal in two months; FIIs turned net buyers of shares worth Rs 838 crore while DIIs sold equities to the tune of Rs 35 crore
After hitting a new crucial level of 30,000-mark last week, key domestic equity indices went into a tailspin on the first trading session of the week after a strong US jobs data stoked fears that a sooner-than-expected rate hike by the federal reserve could hit fund inflows.
Under-performing other key Asian laggards, benchmark Sensex & Nifty fell to their biggest single-day fall in two months, weighed down by weakness in banking, infra and realty shares.
On Monday, the 30-share Sensex tumbled 2.05% or 604.17 points to close below 29,000-mark at 28,844.78, while the broader S&P CNX Nifty shed 2.03% or 181 points at 8,756.75.
Leading the slump, shares of Sesa Sterlite, Hindalco, Axis bank and ICICI bank shed more than 4%, even as HUL and Lupin emerged gainers in a weak market. In the Nifty pack, 44 shares declined while 6 gained.
In the cash market, FII's remained net buyers of shares to the tune of Rs 838.30 crore, while domestic institutional investors sold shares worth Rs 35.31 crore.
Last Friday, US jobs data showed addition of 295,000 new jobs in February, higher than the estimate, and the unemployment rate fell to more than 6 1/2-year low of 5.5% from 5.7% in January. The increase in interest rates by the Fed will lead to dollar strengthening against the rupee leading to a rise in inflation and worsen the current account deficit.
"Domestically all the major triggers are behind us and the next big trigger would be the corporate earnings to kick start from 11th of April," said Jagganadham Thunuguntla, head of fundamental research, Karvy group.
The aggressive bidding by India Inc in the ongoing coal and telecom auctions will adversely affect the balance sheets of the corportas. Also, the advance tax payment due on the March 15 will lead to a liquidity crunch in the market, said analysts.
G Chokallingam. founder, Equinomics Research and Advisory, said, "The companies have aggressively bidded for the coal mines worth Rs 1.43 lakh crore while the telecom operators have bidded for Rs 86000 crore worth of spectrum which will have a bearing on their future earnings. The advance tax payment will lead to an outflow of liquidity from both the retail investors as well as the corporates."
The Federal reserve meeting scheduled on the March 16 and 17 will set the tone for the monetary policy movement of the US central bank.
The language adopted by the Fed during their upcoming meeting will be closely watched by the market players," adds Thunuguntla.
Chandan Taparia, technical and derivatives analyst, Anand Rathi, said, "Liquidation in the bank nifty in today's session led to a fall in Nifty by 2.03%. Meanwhile the Bank Nifty witnessed a sell-off in long position as well as built up in the short position which led to a sharp fall of 3.05%, thus under-performing the broader index."
While the markets witnessed steep fall, the Indian VIX (volatility index) jumped along with its US counterpart CBOE VIX (Chicago board options exchange VIX), thus indicating volatility in the global markets. The near term support level for the Nifty is at 8669 and the Nifty will find resistance at 8900 levels, added Taparia.
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