Sensex tanks over 1058 points in 3 sessions; experts decode market movement

October has begun on an ominous note for the markets with the S&P BSE Sensex sliding around 1058 points, or 2.9 per cent, in just three trading sessions. The fall comes amid a sliding rupee that hit 73.77 to a dollar, rising crude oil prices (Brent hit $85 per barrel) and a possible hike in interest rates by the Reserve Bank of India (RBI) in its upcoming policy review on Friday. That apart, the ongoing developments at IL&FS, YES Bank and housing finance companies dented sentiment in the banking and finance sectors. 

So, how low can the indices go from here and what should your market strategy be? What about rupee and crude oil? This is what the leading experts say:

U R Bhat, managing director, Dalton Capital Advisors

If the Nifty50 is able to close above the 10,700 mark, then we expect these levels to sustain. The next major support for the Nifty50 in case of a close below 10,700 is 9,700. But I don't see the index going to those levels. I don't think this is a good time to invest or do bottom-fishing.

Tirthankar Patnaik, India Strategist, Mizuho Bank

The market fall on Thursday has been led by index heavyweights, whereas the broader markets are yet to react. The Nifty50 index can easily slip another 200 - 300 points from here. The real worry is, however, on the forward multiples of the market. We are meaningfully higher than the long-term average. There is overvaluation built in even at the current levels. A correction from the current levels will be dependent on how the rupee and crude oil prices play out. That apart, global cues remain inimical and this will impact sentiment back home as well.

Jagannadham Thunuguntla, senior vice-president and head of research (wealth), Centrum Broking

Despite government’s decisive move about IL&FS, the markets are under relentless pressure on the back of Crude Oil touching multi-year highs and Rupee making fresh all-time lows. The precarious positioning of international macros simply not letting the pressure-off the market. 

The last-man-standing - industries such as large-cap autos and information technology (IT) - have also started melting, almost leaving no place for markets to hide. Markets are eagerly awaiting decisive relief measures from government to provide confidence to Indian Rupee, which is making fresh all-time lows almost on daily basis.

Indranil Sen Gupta, India economist at Bank of America Merrill Lynch

We think that the MoF/RBI will have to step up support for the rupee with the RBI's ability to sell FX limited to $25-30 billion. If FPI flows do not revive, with the US-China trade war escalating, the RBI will have to sell another $10-15 billion by March. Our FX strategists forecast Rs 75/USD by June with our oil strategists seeing a $95/barrel level on crude oil.

Paul Hickin, associate director at S&P Global Platts

The consensus from analysts seems to be that oil will average close to $80 a barrel next year – not far off where they are now – but there could be much volatility over that period and especially in the coming quarter. According to the latest S&P Global Platts survey of 10 top banks and analysts, there is likely to be renewed price strength in the coming quarter but with many analysts pointing to $100 / barrel being a material risk but not a central forecast. Expectations of a return to $100 oil centre on how much will be removed from the market. READ THE FULL INTERVIEW HERE