 "Sensex, Nifty close below 200-DMAs")
The country's benchmark indices-the Sensex and the Nifty-- closed below their 200-day moving average (DMA) for the first time in nearly 18 months following a sharp correction over the past two months. The 200-DMA is a technical indicator to gauge the strength of the market. Often the 200-DMA is considered to be a strong support and the market is considered to be resilient as long as it trades above this level.
The Sensex on Monday ended at 27,176.99, down 261 points, or 0.95%. The 50-share Nifty ended at 8,213.80, down 91.5 points, or 1.1%. The 200-DMA for Sensex and the Nifty is 27,482.4 and 8,215 respectively, as per Bloomberg data.
"The benchmark indices closing below their 200-DMA is concerning sign. A rebound was expected around the 200-DMA levels, however, that didn't happen. Selling by foreign investors and weak corporate earnings is hurting the market," said Yogesh Radke, head (quantitative research) at Edelweiss Financial Securities
Before today the benchmark indices had closed below their 200-DMA in August 2013. The Indian market has traded above this key technical level for over 400 trading days and has seen a sharp 40% rally during this period.
The Sensex on Monday ended at its lowest level since January 7, 2015 following nearly 3% fall in key stocks such as State Bank of India (SBI), HDFC and Hindustan Unilever.
Selling by overseas investors due to concerns over retrospective taxation and disappointing March quarter earnings have weighed continued to weigh on the market.
Foreign institutional investors (FII) continued to pull out money from the Indian market, selling shares worth around Rs 1,750 crore on Monday, provisional data showed.
More From This Section
According to technical experts the market is expected to slide another 2-5% from current levels.
"The trend is looking weak. Going by price patterns the Nifty could go to 7,980," said Shubham Agarwal, senior analyst technical equities at Motilal Oswal.
Experts believe the market is still slightly above its 200-day exponential moving average (EMA) and if it decisively closes below this level the market could see further sharp correction. (DMA is a simple average, while EMA gives importance to recent data points).
"There could be further downward pressure till 8,000 levels (on the Nifty) as traders will look to unwind their positions ahead of the F&O expiry. Till the time the indices close convincingly above the 200-DMA sentiment might continue to remain weak," said Radke.
The market is expected to remain volatile ahead of the expiry of April series derivative contracts on Thursday.
Investors will also eye signs for improvement in corporate earnings, two-day US Federal Reserve meeting, which begins tomorrow and fate of key bills in the ongoing Budget session of the Parliament, say experts.