Manic Monday! Sensex falls over 1700 points, Nifty below 16,900: 5 factors weighing on D-Street

Indian market started off on a weak note on Monday amid rise in geopolitical concerns. The S&P BSE Sensex and Nifty50 fell more than 2 per cent each in a kneejerk reaction.

The S&P BSE Sensex plunged more than 1700 points, while the Nifty50 breached 16,900 on the downside in Monday's closing.
 

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Sectorally, selling was seen in realty, finance, telecom, banks, and capital goods.

"Sentiments have turned very negative for the short-term with the heightened tension over the Ukraine crisis. Weakness in global markets is the direct fallout of the Ukraine crisis. Crude at an eight year high is another major macro concern for India. If crude remains at levels of $95 for an extended period of time, the RBI will be forced to revise upwards its 4.5% CPI inflation projection for FY23. Continuation of the accommodative monetary stance too will be difficult. While all these are negatives, diffusion of the Ukraine crisis  can trigger a sharp rebound in markets led by large-cap bluechips," said V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services.  

We have collated a list of five factors that could be weighing on D-Street:

Weak Global Markets:

Indian market woke up to weak Asian markets tracking losses from Wall Street on Friday. Most of the Asian markets were trading in red as investors worried about escalating tensions surrounding Ukraine and rising U.S. inflation.

On Friday, the Dow Jones Industrial Average ended down 503.53 points, or 1.43%, at 34,738.06; the S&P 500 lost 85.44 points, or 1.90%, at 4,418.64; and the Nasdaq Composite dropped 394.49 points, or 2.78%, to 13,791.15, said a Reuters report.

Ukrain-Russia Tensions:

Media report highlighted that Russia could invade Ukraine at any time and might create a surprise pretext for an attack, the United States said on Sunday, as it reaffirmed a pledge to defend "every inch" of NATO territory, said a Reuters report.

Russia has more than 100,000 troops massed near Ukraine, which is not part of the Atlantic military alliance, and Washington - while keeping open the diplomatic channels that have so far failed to ease the crisis - has repeatedly said an invasion is imminent, the report added.

"Indian markets witnessed a sharp fall on the back of rising geopolitical tension between Russia and Ukraine. This geopolitical tension is leading to a sharp rise in crude oil prices which is another headwind for Indian equity markets. World markets were trying to digest record inflation in the US but the surge in geopolitical tension spoiled the mood. There is some sentimental impact of the bank fraud issue of ABG group on banking stocks but it doesn't have a material impact as it is already part of NPA," 

Rise in Crude oil prices:

Oil prices on Monday hit their highest in more than 7 years on fears that a possible invasion of Ukraine by Russia could trigger U.S. and European sanctions that would disrupt exports from the world`s top producer in an already tight market, said a Reuters report.

Also Read: Oil prices jump more than 1% to 7-year highs on supply jitters

US Fed Minutes:

Most Asian markets were trading weak ahead of the US Fed minutes to be released on Wednesday, 16 February.

The Street is also factoring in a big rate hike of about 50 bps in March.

“Markets have been in convulsions since an alarmingly high U.S. inflation reading sparked speculation the Federal Reserve might raise rates by a full 50 basis points in March,” said a Reuters report.

​​Also Read: Asian stocks slip amid warnings that Russia could invade Ukraine

Additionally, foreign investors have pulled out around Rs 10,000 from the cash segment of Indian markets so far in February, data showed.

“Markets have turned highly volatile, responding to alternate bouts of selling and buying. FIIs have been selling continuously and bears have been going short on stocks/segments where FII's holdings are large, and they expect FIIs to sell more,” Dr. VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services, said.

Technical Factors:

The Nifty50 breached 17000 on the downside in the first 30 minutes of trade pushing the index lower by over 2 per cent. The index has breached crucial short-term moving averages placed at 30 and 50 DMA.

The next big support for the index is placed at 200-DMA placed at 16,788.

Amid a rise in geopolitical tensions and rate hike fears from the US Fed, traders are advised to remain stock specific and avoid any aggressive positions, suggest experts.

"On a broader timeframe chart, this is seen as a time-wise correction where we could see buying interest on declines and selling pressure at higher levels. Until we see a clear breakout from this consolidation, the market is likely to continue such directionless moves and hence, the focus should now be on stock-specific trades," Ruchit Jain, Lead Research, 5paisa.com, said.

"The support end of the mentioned ‘Triangle’ pattern would be seen around 17130-17150 while 17570-17600 would be seen as resistance. For the week, we expect Nifty to trade within this range and only a breakout on either side would lead to the next directional move," he said.

Jain advises traders to focus on stock specific trades and avoid aggressive positions until we see a breakout on either side.

(Disclaimer: The views/suggestions/advices expressed here in this article is solely by investment experts. Zee Business suggests its readers to consult with their investment advisers before making any financial decision.)