Budget blues for market

A sharp fall in the Chinese stock prices took a toll on the Indian markets on Tuesday as the Sensex closed below the crucial 13,500-mark for the first time since January 10.

Analysts said the sharp electoral reverses suffered by the Congress in three states also led to fears that the UPA government might backtrack on crucial economic reforms in tomorrow's Union Budget.

The Sensex lost 170.69 points or 1.25 per cent on Tuesday to close at 13,478.83 while the broader Nifty-50 index fell by 48.1 points or 1.22 per cent to 3,893.90. With Tuesday's fall, the Sensex has shed 1,173.17 points or 8 per cent since February 8, making the much-anticipated pre-budget rally a non-starter.

China's stocks crashed by over 9 per cent on Tuesday, its biggest single day fall in 10 years, wiping off $107.8 billion from the Shanghai stock market. The relative share index (RSI), a key index used by analysts to check the strength of the market, shows Indian markets not too far from China.

"China's RSI is 98 while BSE has an RSI of 88," said Alex Mathew of Geojit Financial Services. RSI at 80 or above show the markets are in overbought position while 20 and nearer levels indicate oversold position. Markets are more likely to fall from overbought position and tend to go up from oversold positions.

"The overall breadth of the market shows the number of stocks that declined and advanced evenly distributed. Tuesday's fall, we feel, is due to selling in index-weighted scrips," said a technical analyst with a domestic brokerage outfit.