Sensex misses 50K, as global mood changes confidence

When most market participants were anticipating the Sensex (key benchmark index) to hit the 50,000-mark this week, the index reversed direction on Friday.

After moving past the 49,500 level, the Sensex fell back to 49,034, declining 549 points or 1.11 per cent. Friday’s fall was on the back of weakness in global markets that may have made investors nervous about the market being overbought after the stupendous rally of the past few weeks, analysts said.

The Nifty index fell by 161 points or 1.1 per cent to close at 14,433. The fall in both the key indices has been the steepest in more than two weeks.

‘A one-day drop’

Market experts, however, suggested that Friday’s fall may not be the end of the rally and the the index’s journey towards the 50,000 mark could continue in the near future.

“The sharp decline on Friday seems to be a one-day drop in the market as per the symmetrical daily chart pattern and we expect the Nifty to show an upside bounce to retest the new high of 14,653 in the next week. On the flip side, a sharp follow-through weakness in the next 1-2 sessions is expected to negate this pattern. Immediate support is placed at 14,350,” said Nagaraj Shetti, Technical Research Analyst, HDFC Securities.

Warning ‘indicator’

Reports have also suggested that the Buffett Indicator — a key indicator of stocks valuations — was splashing the warning signs for Indian markets. The indicator measures market capitalisation-to-GDP ratio, which recently hit 98 per cent for India. According to the indicator, stocks and markets are deemed expensive when the value climbs above the 100 level.

On Friday, the global stock markets fell after US President elect Joe Biden unveiled his fiscal stimulus package and people turned cautious ahead of the start of the earnings season. Biden has announced a $1.9-trillion stimulus package that raised fears of possible tax hikes and higher interest rates in the US that affected global funds.

“It’s prudent to avoid naked leveraged positions for now and prefer hedged strategies. In case of a further slide, Nifty would find immediate support at 14,250 and then 14,100 zone,” said Ajit Mishra, VP - Research, Religare Broking.

On Friday, the share price of Tech Mahindra was the top loser in the Sensex pack, shedding 4.35 per cent, followed by HCL Tech, ONGC, Asian Paints, UltraTech Cement, HDFC and HUL. Only four Sensex stocks including Bharti Airtel, ITC, Bajaj Auto and Bajaj Finance closed the day in positive with gains of up to 3.84 per cent. Sector-wise BSE oil and gas, IT, realty, capital goods, utilities, energy, power and consumer durables indices declined by 2.43 per cent. The BSE Telecoms index gained 3.68 per cent. The BSE midcap and smallcap indices fell by up to 1.25 per cent.

During the week, foreign portfolio investors bought stocks worth more than ₹6,000 crore in the cash segment.