Profit booking hits D-Street: Why BSE Sensex, Nifty50 gave up key levels on Thursday? Check factors behind fall

The Indian markets snapped three days gaining session to end almost 1.5 per cent on Thursday tracking weak global cues on weekly derivative expiry. Analysts had estimated that the markets would react to the US Fed meeting decision and Chairman Jerome Powell’s commentary on inflation.

Both the benchmark indices – Nifty50 and BSE Sensex – have closed below key levels of 18500 and 62,000 for the first time since November 24, 2022. At the market close, the former was down 879 points or 1.4 per cent to 61,799 and the latter was down 245 points or 1.3 per cent to 18,415 today.

Even boarder markets followed the benchmarks as both the Nifty Mid and Small Cap 100 slipped between 0.5-1 per cent on the NSE today. Similarly, Nifty Bank crashed over 500 points a day after hitting an all-time high above 44,000 to close at 43,498 levels today.

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Nifty Indian equity market witnessed sharp profit booking after hawkish commentary along with a 50 basis rate hike by US Fed chairman Jerome Powell, Santosh Meena, Head of Research at Swastika Investmart Ltd, in his post-market comment said.

“The US market didn't react too much yesterday, but Dow futures were trading lower during the day. Anecdotally, the US market reacts to important events on the next day, and our market tries to assume their overnight move,” the analyst added explaining the reason for the massive fall of Indian indices.

Below are the factors that led the markets fall on Thursday

US Fed Announces Another Rate Hike

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The US Fed FOMC raised interest rates by half a percentage point on Wednesday and projected at least an additional 75 basis points of increases in borrowing costs by the end of 2023, as well as a rise in unemployment and a near-stalling of economic growth, according to a Reuters report.

In comments after the statement, Fed Chair Jerome Powell said it was too soon to talk about cutting rates as the focus is on making the central bank's policy stance restrictive enough to push inflation down to its 2 per cent goal.

Jittery US Markets

US stocks closed lower in volatile trading on Wednesday following a policy announcement by the Federal Reserve that raised interest rates by an expected 50 basis points, but its economic projections see higher rates for a longer period.

The Dow Jones Industrial Average (.DJI) fell 142.29 points, or 0.42%, to 33,966.35, the S&P 500 (.SPX) lost 24.33 points, or 0.61%, to 3,995.32 and the Nasdaq Composite (.IXIC) dropped 85.93 points, or 0.76%, to 11,170.89.

Also Read: Year-Ender 2022: Mid and SmallCap indices put a mute show this year so far – analysts explain what led to the dull performance

Ripple Effect On Asian Markets

Following US Indices' weak sentiment, the Asian markets too closed in the red as South Korea’s Kospi and Hong Kong’s Hang Seng took the maximum beating – each down over 1.5 per cent, while Japan’s Nikkei and China’s Shanghai saw minor cut, down between 0.25-0.35 per cent on Thursday.

Nifty Ends Below 20-DMA

Technically, Nifty witnessed lower highs with closing below 20-DMA with a big red bar — which is a bearish sign, however, 18325-18250 is an immediate support zone that bulls will try to protect. 18100 and 18000 will be the next important support levels.

On the upside, the 20-DMA of 18530 will now act as a key hurdle; above this, the bearish setup will nullify, and market may resume its bullish momentum. 18730/18800/18888 will be the next resistance levels.