 "Weekly roundup: Sensex, Nifty50 plunge up to 3%; smallcaps take a knock")
The equity benchmarks settled the holiday-truncated week ended November 18 near six-month lows discussion on impact on demonetisation on consumption, washout of initial session of winter session of Parliament and the US Fed Chair Janet Yellen’s comment on interest rate hike influencing the market sentiment through the week.
During the week, the S&P BSE Sensex shed 668 points, or over 2%, to settle at 26,150 on Friday. The broader Nifty50 dropped 222 points, or nearly 3%, to close the week at 8,074. Midcap and smallcap crashed. The BSE Midcap index lost 3%, while the BSE Smallcap index dipped 5% during the truncated week.
Vinod Nair, Head of Research, Geojit BNP Paribas Financial Services said that market participants were shying away from taking fresh positions.
“The market remained in a strong downtrend and moved lower throughout the week. The levels around 8,000-8,050 depicted strong resilience and remained major support region,” said Rohit Gadia, Founder & CEO at CapitalVia Global Research.
Gadia said that last week’s fall is not enough to conclude the negativity is over and that the market will witness a trend reversal.
“Unless Nifty50 manages a strong recovery and closes above the nearest supply level around 8,200, the medium term trend will remain down. The chance of doing so seems very low and we expect in case market break below the level of 8,000, the downtrend is likely to gain momentum. In that case, we expect the market to move till 7,800 level,” he added.
The week saw BSE Metal index dropping 6.4%, followed by the BSE Consumer Durables index (down 6.3%), the BSE Realty index (down 4.5%), the BSE FMCG index (down 4.5%) and BSE Bankex (down 3.9%). The BSE Power and BSE IT index shed 0.9% and 0.1%, respectively.
Among stocks, Tata Steel plunged 9% for the week, while its DVR shares were down 9.1% on NSE. Ambuja Cements plummeted 9.5%, Grasim Industries tanked 8.9%, while Zee Entertainment slumped 7.9 %.
Gainers included Bank of Baroda (up 10.3%), NTPC (4.9%) Power Grid (4.8%) and Tech Mahindra (3.7%).
Demonetisation woes intensify: The worries about the impact of demonetization on the economy and consequently on the stock market continued to plague the market. However, consensus believes the long-term gains will even out the short-term pains.
“We feel the impact of demonetization would be visible on select sectors such as real estate and consumption for a quarter or two; but by and large, its long-term implications will be favourable once the money supply gets normal,” said Jayant Manglik, President - Retail Distribution at Religare Securities.
Macroeconomic data: Softening food prices helped ease retail as well as wholesale inflation in October, raising hopes that RBI may go in for another rate cut in its monetary policy review next month.
Retail or CPI inflation dipped to 14 month low of 4.20% in October, while the one based on wholesale prices or WPI fell for the second consecutive month to 3.39% in October.
Fed rate hike: Market ended the week decoding Yellen’s statement who said a rate hike in US may ensue ‘relatively soon’.
Further, the strong US jobs data released Thursday strengthened the case for raising interest rates.
In a testimony to US Congress, Yellen in a statement said: “At our meeting earlier this month, the committee judged that the case for an increase in the target range had continued to strengthen and that such an increase could well become appropriate relatively soon if incoming data provide some further evidence of continued progress toward the Committee's objectives.”
In a testimony to US Congress, Yellen in a statement said: “At our meeting earlier this month, the committee judged that the case for an increase in the target range had continued to strengthen and that such an increase could well become appropriate relatively soon if incoming data provide some further evidence of continued progress toward the Committee's objectives.”
The comment has raised chances of rate hike in December policy review.
Market next week: The benchmark indices are expected to remain volatile ahead of expiry of November series futures and options expiry on Thursday.
A total of 50-odd companies will declare their quarterly results during the trading week. The list included Larsen & Toubro, National Aluminium Company, BEML, Bata India Aditya Birla Fashion and Retail, among others.
“The upcoming expiry week will further add to the prevailing volatility so traders should remain extra cautious and prefer hedged trades. Also, continue to keep a close watch on banking pack as its divergence with Nifty is now adding to the uneasiness,” said Manglik.
