NEW DELHI: There were warning signals that a selloff was becoming due, and Dalal Street saw it on Monday as a fresh spat between the US and China over the origin and handling of the Covid pandemic threatened to snowball and sent financial markets into a tailspin.
Domestic equities plunged mirroring global market trends.
A further extension of the lockdown and disappointing March quarter earnings also dampened sentiment.
Bank and IT stocks dragged Sensex 2,002 points lower to 31,715 while the 50-share Nifty fell 566 points to 9,293, marking the fifth fall of over 500 points in Calendar 2020. This was also the biggest one-day drop for the equity indices in over a month.
Analysts said tensions over the pandemic and a gloomy economic outlook are haunting investors, and global news flow and domestic earnings commentaries will drive the market from here on.
“Rising trade war tensions between the US and China and dire economic news at home have added to the negative sentiment. The lockdown extension and fear that the economy and businesses will take longer to get back on track impacted the markets, ” said Vinod Nair, Head of Research at Geojit Financial Services.
Deepak Jasani, Head of Retail Research at HDFC Securities, said technically Nifty has given a bearish signal by forming a Bearish Island Reversal pattern after a rise. The next support to look forward to is at 9,132.
Does it mean the bearishness will continue in the near term? Here’s a look at what some of the key indicators are suggesting for Tuesday’s market action:
US shares drop amid airlines slump
US stocks opened lower on Monday following growing US-China tensions about the origins of the coronavirus outbreak, while billionaire Warren Buffett’s admission he had dumped his airline shares crushed major US carriers. The Dow Jones Industrial Average fell 142.14 points, or 0.60 per cent, at the open to 23,581.55. The S&P 500 opened lower by 15.70 points, or 0.55 per cent, at 2,815.01. The Nasdaq Composite dropped 49.63 points, or 0.58 per cent, to 8,555.32 at the opening bell.
European shares start May on dour note
European stocks tumbled on Monday as investors returned from a May Day break to a fresh spat between the United States and China over the coronavirus crisis that triggered sharp declines in cyclical sectors. The pan-European STOXX 600 fell 2.3 per cent in a downbeat start to the month, after the index recorded a 6 per cent gain in April. Euro zone shares were down 3 per cent.
Tech charts have bearish signals
Nifty’s daily chart pattern resembled an ‘Island Reversal’ pattern, a formation that does not bode well for the bulls. At Monday’s close, the index has decisively broken below its support at 9,560 formed by the upward-sloping trendline seen in last five weeks. “If Nifty breaks the 9,260 level, it may retest the earlier support zone at 9,140, 9,100 levels,” said Rajesh Palviya of Axis Securities.
Spike in VIX signals return of volatility
Nifty has seen a breakdown from the Rising Trendline on the daily chart. Momentum oscillator RSI has also turned southward and is seeing a negative crossover with its average. India VIX moved up sharply by 28.48% to 43.67 levels. The volatility index negated the lower high-low sequence of last five weeks, and thus, we may see further pressure on the market with higher volatility.
Stocks showing bullish bias
Momentum indicator Moving Average Convergence Divergence (MACD) on Monday showed bullish trade setup on the counters of Arihant Superstructures and Orbit Exports. The MACD is known for signalling trend reversals in traded securities or indices. It is the difference between the 26-day and 12-day exponential moving averages. A nine-day exponential moving average, called the signal line, is plotted on top of the MACD to reflect ‘buy’ or ‘sell’ opportunities.
Stocks signalling weakness ahead
The MACD showed bearish signs on the counters of ITC, Sun Pharma, Bharat Electronics, Biocon, Dabur India, Granules India, Colgate Palmolive, Berger Paints, Mishra Dhatu Nigam, Orient Paper, Balrampur Chini, Pricol, Jagran Prakashan, Emami, The New India Assurance, Asian Hotels (North), KCP Sugar, Nelcast, Kopran, Advanced Enzyme Tech, Liberty Shoes, Monnet Ispat & Energy, Essar Shipping, Murudeshwar, Madras Fertilizer, Aurionpro Solutions, TV Today Network Ltd, Texmaco Infrastructure, Ingersoll, Sicagen India, Fine Organic, I G Petrochemicals, Hind Rectifiers, Hisar Metal, Krebs Biochemicals &, Smartlink Holdings, Cera Sanitaryware, GRP and Naga Dhunseri Group. Bearish crossover on the MACD on these counters indicated that they have just begun their downward journey.
Most active stocks in value terms
RIL (Rs 3525.47 crore), HUL (Rs 1784.46 crore), Bharti Airtel (Rs 1780.02 crore), Axis Bank (Rs 1548.89 crore), Bajaj Finance (Rs 1538.75 crore), ICICI Bank (Rs 1335.64 crore), HDFC Bank (Rs 1244.08 crore), Aurobindo Pharma (Rs 1103.23 crore), HDFC (Rs 1059.45 crore) and SBI (Rs 1045.30 crore) were among the most active stocks on Dalal Street on Monday in value terms. Higher activity on a counter in value terms can help identify the counters with highest trading turnovers in the day.
Most active stocks in volume terms
Vodafone Idea (Shares traded: 44.48 crore), BHEL (Shares traded: 14.55 crore), Tata Motors (Shares traded: 9.10 crore), SBI (Shares traded: 5.81 crore), IDFC First Bank (Shares traded: 4.37 crore), ICICI Bank (Shares traded: 3.88 crore), Axis Bank (Shares traded: 3.78 crore), Bharti Airtel (Shares traded: 3.40 crore), Vedanta (Shares traded: 3.31 crore) and Ashok Leyland (Shares traded: 3.29 crore) were among the most traded stocks in the session.
Podcast: Has ‘sell in May’ begun?
Midcaps and smallcaps fell less than the largecaps on Monday. Sectorally, banking, metal, auto and consumer durables indices emerged the worst laggards while healthcare and telecom indices ended in the green.
Stocks seeing buyers’ interest
AstraZeneca, Ruchi Soya Industries, Abbott India and Torrent Power witnessed strong buying interest from market participants as they scaled their fresh 52-week highs on Monday signalling bullish sentiment.
Stocks seeing selling pressure
JM Financial, Bank of Baroda, Aditya Birla Fashion and Godrej Industries witnessed strong selling pressure in Thursday’s session and hit their 52-week lows, signalling bearish sentiment on these counters.
Sentiment meter favours bears
Overall, market breadth remained in favour of bears. As many as 61 stocks on the BSE 500 index settled the day in green, while 439 settled the day in red.
Commenting feature is disabled in your country/region.