Taking cues from global markets and FIIs data, the domestic equity market slid further in line with the trends on SGX Nifty on Monday. SGX Nifty Futures was trading lower by nearly more than 170 points on the Singaporean exchange around 9 am on Monday morning, while Foreign Institutional Investors remained net sellers to the tune of  Rs 6723.59 cr in May so far.  

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Benchmarks Nifty 50 and the Sensex dropped around one per cent on Monday as the former slipped below 16,300 and the latter shed nearly 700 points. The two indices opened at 16,227.70 and 54,188.21 

In the broader market, the Nifty midcap and small cap indices corrected 0.8% and 0.6% respectively. Except for the media, all sectoral indices ended in the red on Monday. Metal and financial stocks were the worst hit.

"Hawkish stance by the Fed, rate hikes by RBI, Bank of England and Australian central bank have created an atmosphere of risk-off for equities. We don't know how long this will last. Nifty corrected by 3.9 percent last week, but investors should not commit the mistake of aggressively buying on this dip assuming that prices have corrected a lot. Even after the correction Nifty is trading at around 19 times FY23 earnings. This is higher than the long-term average of 16 times and certainly not buyable valuation, particularly when equity markets globally are facing many headwinds like risk of growth slowdown, Ukraine war and supply chain disruptions caused by stringent lockdown in China," said V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services.

However, long-term investors may start nibbling at high quality stocks in segments like financials where there is valuation comfort, the expert added. 

In the pre-open, the Sensex fell more than 600 points as 5 shares advanced and 25 declined on the 30-share Index.  

Earlier, Japanese Nikkei 225 dipped more than 2% in the early trade, however, Chinese Shanghai Composite was trading marginally higher by 0.25% around the same time. 

"Nifty closed lower at 16,411 on Friday forming a ‘Doji candle’, while VIX ended at ~21-level. It is currently trading at the support zone (16,500-16,400) and a further follow-through move below 16,350-16,300 would open doors for a deeper correction, while resistance is seen at the Bearish Gap left at 16,600-16,500 zone," said Viraj Vyas, Technical and Derivatives analyst at Ashika Broking. 

For any pullback to gain strength, the Index needs to: (1) close the bearish gap; and (2) needs to stay above 16,800-level, said the analyst. "Until then, it is expected to be under pressure, as the higher timeframe weekly charts depict a large Red Bar with likely support seen at 16,000-level," he added. 

On Friday, all major Wall Street indices closed in the red as Dow Jones dropped 0.3%, Nasdaq Composite nearly 1.5% and S&P 500 settled with over half per cent cut.