Sensex has dropped nearly 800 points since last Thursday; market experts say profit-taking may continue for some time
Domestic key equity indices witnessed steep correction Tuesday tracking weak global markets, with benchmark Sensex ending below the crucial 28,000-mark as investors trimmed their portfolio unnerved by a free-fall in Chinese markets led by Shanghai Composite Index that tanked nearly 5.5%. Dealers said the Indian bourses reflected the mood of major global markets and fell for the second consecutive session.
The BSE Sensex lost 322.39 points or 1.15% to close at 27797.01, while the broader NSE Nifty ended with a loss of 97.55 points or 1.16% at 8340.70.
The Sensex as well as the Nifty to date have lost 765.81 and 223.70 points respectively since the decline began last Thursday, of which the last two trading sessions alone contributed 661.09 and 187.60 points fall.
"The Nifty is now seen strongly supported at 8200 and if this is breached, 8000 is not far away," said Rahul Shah, vice president at Motilal Oswal Securities.
Most dealers said the markets were ripe for year-end profit-taking by major foreign players. "Tuesday's fall mirrored the over 5.4% decline in the Shanghai Index," said an equity analyst with a foreign firm.
According to him, China's growth could be be slower than expected and that it's government was not being transparent about the true picture.
"The Shanghai index has appreciated by over 20% in the last two months and what was being witnessed was profit-taking," said another dealer at a brokerage.
Talks of Chinese president XI Jinping having quit office also triggered the fall in Asian markets. Major global indices on Monday like the Dow Jones and S&P 500 had closed in the red on Monday, registering a fall of 0.59% at 17,852.48 and 0.73% 2060.31, respectively.
Nikkei on Tuesday closed 0.68% down at 17813.38 while Hang Seng was down 2.34% at 23485.53. Most dealers expect the Indian bourses to remain subdued with a negative bias on Wednesday, as
profit-taking is expected to continue despite the sharp correction in crude.
There's a risk of default in Venezuela that kept the sentiment negative, said Kiran Kumar Kavikondala, CEO at WealthRays Securities. Talks of Greece also heading in a similar direction was also doing rounds in the market.
The falling crude, which hit a five year low at $65.29 a barrel, failed to lift sentiment of oil marketing companies. However, crude later inched up to $66.77 in late trades.
"Even though the falling crude benefits India, the fact that the benefits are not percolating down to the common man after initial rounds of retail price cuts on petrol or in food prices. No doubt, overall the government's balance sheet is improving," said a senior banker at a foreign bank.
"The subsidy on fertilisers and oil have collapsed as crude is of highs of $105 to now about $65, which is a massive gain for the Indian government," he added. With the Nifty having breached the crucial support of 8400, market players do not expect a rebound any later than January.
Market participants also said foreign institutional players usually book profits in December before Christmas holidays. On Tuesday FIIs sold equities worth Rs 221.52 crore while domestic institutional investors offloaded shares to the tune of Rs 345.06 crore.
Of the 50 stocks on Nifty, only four scrips ended in the green. Stocks that gained were M&M (1.70%), Dr Reddy's (1.57%), Sun Pharma (0.99%) and HCL Tech (0.25%).
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