Post market’s big fall, experts expect bearish sentiment this week

NEW DELHI:  India’s equity market last week had its biggest weekly slump in eight months with the BSE Sensex and Nifty shedding about 2.5% each. 

On Friday, the BSE Sensex fell 1.13% to 59,306.93 while the Nifty fell 1.04% to 17,671.65. Going forward, market analysts are not expecting much releif as foreign institutional investors, cautioned by recent calls by global brokerages/investment firms such as Nomura and Morgan Stanley, are on a profit booking mode.

Add to it, tepid Q2FY22 quarter earnings show by some blue-chips have started to highlight how overvalued current valuations are. 

FIIs  have sold worth Rs 15,700 crore last week in the cash market while they sold around Rs 25, 500 crore in October. Selling pressure was widespread and most of the sectoral indices settled in the red wherein banking and metal were among the top losers. 

“Markets are expected to remain bearish in short term due to profit booking across various sectors & weak global clues. The Q2 result season is in progress with the market getting mixed responses from companies declaring their results,” said Rahul Sharma, Co-Founder, Equity99. 

Nagaraj Shetti, Technical Research Analyst at HDFC Securities, said, that a reasonable negative candle was formed on the daily chart, which indicate a sharp follow-through weakness in the market. The last two sessions’ decline seems to have changed the positive sentiment of the market.

The recent all-time high of 18,604 (Nifty) of October 19 could now be considered as an important top reversal for the market and that is not going to be challenged in a hurry, added Shetti. 

Ajit Mishra, VP Research at Religare Broking, said, “We are seeing profit taking for the last two weeks and indications are pointing towards a further slide. Keeping in mind the prevailing trend and excessive volatility, it’s prudent to maintain extra caution in the selection of stocks and prefer hedged positions.”

Even though this week is a holiday-shortened one, there are going to be multiple factors that will have a big impact on the market. The most important one will be the US Federal Reserve Policy meeting, which is scheduled to be held on November 2-3. 

“The news flow and market sentiment may be largely dominated by the upcoming FOMC meeting. While investors appear to have priced in the possibility of tapering by mid-November, the focus will now shift to the timing of interest rate hikes in light of the looming threat of inflation,” said Yesha Shah, Head of Equity Research, Samco Securities. 

In the earnings department, more than 350 companies will release their September quarter numbers in this week including HDFC, Tata Motors, Bharti Airtel, and IRCTC.