The Indian markets snapped three-day gains and witnessed a massive selling amid weak global cues, as both the benchmarks closed over 1.3 per cent lower on Friday, while the broader markets – Nifty mid and small-cap – following the frontline indices suite also tumbled over 2 per cent.  

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At the market close, the BSE Sensex slipped over 773 points or 1.31 per cent to 58155-level, while Nifty50 tumbled over 231 points or 1.31 per cent to 17374-mark. 

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Sectorally, almost all sectors are in the red, whereas maximum weakness was seen in IT, followed by consumer durables, realty, metal, pharma and finance stocks with each down over 1 per cent at the close.

Grasim and Tech Mahindra slipped most by over 3 per cent on 50-share Nifty index, followed by Infosys, HCL Tech, UPL, SBI, Kotak Bank and among others each down over 2 per cent at the close.

Indian markets are largely under pressure due to external factors. It is more of a kneejerk reaction, but it could be a good opportunity for long term investors

“The (CPI) inflation in the US has surged to 7.5%, another peak after recording 7% in December 2021. This is perhaps highest in many decades and the probability to an aggressive rate hike of higher than even 25 bps in March 2022 is high now,” Gaurav Dua, Head - Capital Market Strategy, Sharekhan by BNP Paribas, said.

"We expect equity markets to remain volatile globally. Thankfully, the strong inflows in domestic market would support Indian equities. The monthly SIP have crossed record number in Jan 2022 and the number of SIP is over 5 crore now," he said.

We have collated a list of 5 factors that could be weighing on D-Street:

Weak Global Markets:

Indian market woke up to muted trend in Asian markets. U.S. markets overnight had sold off more aggressively than those in Asia did on Friday morning, said a Reuters report.

The Dow Jones Industrial Average tumbled 1.47%, the S&P 500 lost 1.81% and the Nasdaq Composite dropped 2.1%.

“Asian markets are trading on the downside as investors are reacting to losses seen overnight in the US market,” Mohit Nigam, Head - PMS, Hem Securities, said.

US Consumer Price Data:

US consumer prices rose solidly in January, leading to the biggest annual increase in inflation in 40 years, fueling financial markets speculation for a hefty 50 basis points interest rate hike from the Federal Reserve next month, said a Reuters report.

“US stock markets ended sharply lower on Thursday after US consumer prices data came in hotter than expected and subsequent comments from a Federal Reserve official raised fears the US central bank will hike rates aggressively to fight inflation,” added Nigam.

In the 12 months through January, the CPI jumped 7.5%, the biggest year-on-year increase since February 1982.

Fed's Bullard calls for big hike in interest rates:

In a separate report, St. Louis Federal Reserve President James Bullard said on Thursday that he has become "dramatically" more hawkish in light of the hottest inflation reading in nearly 40 years, said a Reuters report.

Bullard now wants a full percentage point of interest rate hikes over the next three U.S. central bank policy meetings, the report said.

With only three Fed meetings between now and July 1, Bullard's comments point to at least one half-percentage-point rate hike.

Selling by FIIs:

Foreign investors have pulled out nearly Rs 10,000 cr from the cash segment of the Indian equity markets. On Thursday, FIIs pulled out Rs 1732 cr from the cash segment.

February would be the fifth straight month of selling by FIIs in the cash segment of the Indian equity markets, and the selloff is likely to continue in near future as well, suggest experts.

“We think the selling will continue as whenever Fed takes the decision of increasing rates, FIIs try to exit from emerging markets.  However, it is for the first time we are seeing huge buying support from retail investors and domestic institutions,” Shrikant Chouhan, Head of Equity Research (Retail), Kotak Securities Ltd, said.

“We also believe that after some time of selling, valuations will become attractive and FII will stop selling.  But in the near term we think their selling may continue,” he said.

Technical Check:

The Nifty50 which climbed 17600 on Thursday failed to hold onto gains and was seen retesting 17300 levels in opening trade.

Tracking the weakness, the index has now breached the 50-DMA on the downside placed at 17,464. The next big support for the index is placed at 17150, suggest experts.

“Technically, the index has taken a support at 61.8% Retracement Level on 08th Feb and reversed from there, which suggests further support zone near 17150 levels,” Palak Kothari, Research Associate at Choice Broking, said.

On the Options front, maximum Call OI is placed at 18000, and then towards 17500 strikes which will act as key resistance levels.

Maximum Put OI is placed at 16500, and then 16000 strikes which are likely to act as big support on the downside.

“Marginal Call writing is seen at 17600 then 17900 strikes while Put writing is seen at 17600 then 17500 strike. Option data suggests a wider trading range between 17200 to 17800 zones while an immediate trading range in between 17350 to 17700 zones,” Chandan Taparia, Vice President, Analyst-Derivatives at Motilal Oswal Financial Services Limited, said.

(With inputs from Reuters and other agencies)

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