These 5 factors weighed on market as Nifty breached 11,300-mark & Sensex fell nearly 300 pts

Market continued to correct on Tuesday with the Sensex falling nearly 300 points after a 500-point fall in previous session.

The 30-share BSE Sensex ended 294.84 points lower at 37,290.67 and the 50-share NSE Nifty lost 98.90 points at 11,278.90 despite positive global cues.

Despite the recent correction, the Nifty is up 8 percent and Sensex has gained more than 10 percent year-to-date.

The market has been seeing headwinds from high crude oil prices, weaker rupee, bond yield above 8 percent and trade war. Ridham Desai of Morgan Stanley believes these risks seems to be already priced in as the stock market in general is forward looking.

Here are top 5 factors which are weighing the market:

Crude Oil

The top most reason to worry is rising crude oil prices as India imports more than 80 percent of its oil requirement and oil constitutes major part of its import bill.

So any rise in crude along with falling rupee has direct impact on trade deficit of the country.

Brent crude futures, the international benchmark for oil prices, on Tuesday rose over 1 percent to $79 a barrel after Saudi Arabia said it is comfortable with $80 a barrel levels.

"Saudi Arabia is now comfortable with Brent oil prices rising above $80 a barrel, at least in the short term, as the global market adjusts to the loss of Iranian supply from US sanctions," Bloomberg reported.

The latest escalation in the US-China trade war also clouded the outlook for crude demand from the two countries, which are the world's top two oil consumers.

Trade War

Another key reason for correction in equity market is ongoing trade war between world's largest economies — US and China.

US President Donald Trump on Monday said he would impose 10 percent tariffs on about $200 billion worth of Chinese imports and duties will increase to 25 percent at the end of 2018. Beijing already warned that it will retaliate against the measures.

Recently, Trump also said US may impose tariffs on another $267 billion worth of Chinese goods.

Rupee

The currency depreciated 74 paise on Monday and another 46 paise on Tuesday to end at record closing low of 72.96 a dollar.

It has depreciated more than 14 percent year-to-date.

PSU Banks

The government on Monday announced merger of Bank of Baroda, Vijaya Bank and Dena Bank as a part of reforms to solve banking crisis. But the market did not receive it well.

All stocks under Nifty PSU Bank index are under pressure and index itself fell 5.4 percent.

Bank of Baroda, which has been downgraded by brokerage houses after merger announcement, corrected 17 percent, followed by Indian Bank, Canara Bank, Union Bank, Bank of India, Syndicate Bank, PNB, Andhra Bank, IDBI Bank, SBI and Oriental Bank which declined between 3-9 percent.

Technicals

The Nifty50 continued its downward thrust and broke the crucial support of 11,300 and went near its corrective swing low of 11,250. The index hit an intraday low of 11,268, before signing off the session with a strong bearish candle for second day in a row.

"The consistent fall suggests that market is completely in a bear grip. Hence it will be a matter of time before it breaches recent corrective swing low of 11,250 and head towards its critical support zone placed around 11,100 levels," Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory, Chartviewindia.in told Moneycontrol.

However, he said based on long term trend studies, there is a strong technical evidence suggesting that this corrective swing shall get culminated somewhere in the zone of 11,130–11,050 kind of levels. Hence, he advised traders to cover their short positions as we head towards 11,150 kind of levels.