It was a bloodbath on the bourses on Monday with benchmark indices closing in deep red as the Russia-Ukraine war clouds spooked investors globally. As the bears took charge on Monday, Sensex logged the worst single-day fall in 10 months, crashing 1,700 points.

A 3 percent fall in the Nifty and Sensex was caused by the foreign portfolio investors (FPI) selling stocks worth ₹4,253 crore in the cash segment. Domestic institutions bought shares worth ₹2,170 on the day.

Double whammy situation

Santosh Meena, Head of Research, Swastika Investmart Ltd, said, “Indian market tumbled sharply amid geopolitical tension. This is leading to a sharp surge in crude oil prices and the dollar index which is another negative trigger for emerging markets like India.”

“We are seeing continuous selling by FIIs while DII flows may also come down ahead of the big LIC IPO. The inflation and rising interest rate environment in the US is still a concern for the market and this geopolitical tension is creating a double whammy situation for the global markets,” added Meena.

The meeting of the US Federal Reserve next month will set the tone for the markets going forward. Market could take a further hit if the Fed hikes interest rates this month ahead of its scheduled meeting in March.

They all fall down

On Monday, the Sensex fell by 1,747 points to close at 56,405. The Nifty declined by 531 points to close at 16,842. Data for the derivatives segment was not available till the time of going to press. In February so far, the FPIs have sold stocks worth ₹13,966 crore.

“Nifty has support at 16,830-16,750 and we should bounce back from this level towards 17,600 in the near term. There is an extreme short term bottom signal. Only 5 per cent of all F&O (futures and options) stocks are showing rising momentum and 95 per cent are showing falling momentum; and when things get this negative (<10 per cent) markets usually bounce,” said Rohit Srivastava, strategist, Indiacharts.

Global cues

The US stocks futures have nearly recovered ahead of their opening from the time when they were deep into the negative zone, when the Indian markets were open for trading. However, key indices in Europe were down anywhere between 2 and 3 per cent. The US Dow Jones index futures were down nearly 250 points on Monday morning (IST).

After the US inflation numbers came at a decade-high that led the markets to believe that an interest rate hike from the Fed was imminent, retail inflation for January in India came in above the 6 per cent mark. It has risen to a seven-month high, primarily due to rising food and fuel prices. If the inflation does not cool, it could also pressure the Reserve Bank of India for a rate hike.

‘Tread with caution’

Nifty did manage to close above its 200 DMA, but this will act as a crucial immediate support zone tomorrow (Tuesday). However, if that is breached, a retest of levels of 16,400 cannot be ruled out. Amid rising global uncertainties and the current ongoing Assembly polls, one should tread with caution. A short-term bearish bias should be maintained and the focus must be on preserving capital. Investors having a long term horizon should wait for markets to stabilise and initiate fresh investments only in companies having strong earnings visibility, good balance sheet strength and a reasonable valuation,” said Yesha Shah, Head of Equity Research, Samco Securities.