Taking Stock | RBI minutes-triggered volatility mars weekly expiry, indices end lower for the third day

Volatility gripped the market on the weekly expiry after RBI minutes signalled another interest rate hike in its next policy meet. Growing concerns over the spread of COVID and the advisories issued by the authorities also dampened the sentiment.

At close, the 30-pack Sensex was down 241 points, or 0.4 percent, at 60,826, while the Nifty lost 72 points, or 0.4 percent, to close the day at 18,127.

Like the day before, the indices failed to hold ground after a strong opening even as global markets ignored the negative news about COVID to trade positive.

“Positive sentiments from the global markets failed to bolster optimism in the domestic indices which extended losses owing to the hawkish comments from the RBI’s MPC minutes, which suggested that a premature pause in rate tightening would be a ‘costly policy error at this juncture’,” said Vinod Nair, Head of Research, Geojit Financial Services.

On the other hand, better-than-expected earnings in the US amid recession fears and strong consumer confidence readings lifted global sentiment, he said.

All sectoral indices were down, even as the Nifty IT showed some resistance and managed to close at the same levels as the previous day.

Nifty Realty was the top loser, with a loss of 1.4 percent and was followed by the Nifty PSU bank index, which closed down 1.2 percent.

Nifty metal and auto indices were down 1.1 percent each, while other sectoral indices lost less than a percent.

UltraTech Cement, SBI Life Insurance, Infosys, Grasim and Kotak Mahindra Bank were the top gainers on the Nifty, with gains ranging from 0.6 to 0.9 percent.

Top Nifty losers included UPL, Mahindra & Mahindra, Bajaj Finserv, Eicher Motors and Tata Motors, with each of these stocks down between 2 and 3.4 percent.

Stocks and sectors

On the BSE, only BSE Tech Index managed to close in green with a gain of 0.07 percent while BSE Industrial was the top loser and was down 1.8 percent. BSE Utilities and Capital Goods were down ~1.6 percent each while BSE Power was down 1.5 percent.

The broader indices too could not escape the negative sentiments and ended the day in red with BSE Midcap losing 0.8 percent and BSE Smallcap lost 1.8 percent.

The India VIX, which indicates the degree of volatility traders expect over the next 30 days, dipped 2.4 percent from 15.6 to 15.2. It had surged more than 12 percent the day before.

A long build-up could be seen in Lupin, Jubilant Foodworks and Alkem Laboratories while a short build-up was witnessed in Bandhan Bank, IDFC First Bank and Gujarat Gas.

Among specific stocks, a volume spike of more than 1,200 percent was seen in PNB, while the volumes in Delta Corp and Grasun surged more than 500 and 400 percent each.

Outlook for December 23

Shrikant Chouhan, Head of Equity Research (Retail), Kotak Securities Ltd

Markets succumbed to losses for a second straight session as rising Covid cases in China and Japan continued to dampen sentiment, prompting investors to prune their exposure in metals, auto and realty shares. However, other Asian and European indices maintained their upward bias, which shows that Indian valuations are quite high and the current global uncertainty and other risk factors doesn't justify the higher valuations.

Technically, the Nifty is trading near the 50-day SMA but intraday texture is indicating strong possibility of a quick pullback rally from the current levels. For Nifty, 18050 would be the key support zone for the market and if the index trades above the same it could move up to 18300-18350 levels. On the flip side, dismissal of 18050 may trigger further selling pressure and below the same, the index could slip till 17950-17930.

Prashanth Tapse - Research Analyst, Senior VP (Research), Mehta Equities Ltd

Bears dominated for the second day in a row as rising Covid-19 cases in China weighed on sentiment. Nifty traded with a negative bias as market participants await the Q3 GDP revision from the US and the weekly US Jobless Claims data. The negative takeaway was that the Indian benchmark indices dropped despite no headlines of doom and gloom. It appears the return of risk for benchmark Nifty with immediate downside risk at 18057 mark and below the same expect a waterfall of selling till 17957 mark and then at 17750 zone.