Markets tank on weak global cues

Indian equities tanked in late trade on Tuesday on weak global cues as worries of a global recession and geopolitical crisis weighed on sentiment. The Sensex tanked 844 points or 1.5% to end at 57147, while the Nifty 50 settled at 16984, down 1.5%, below psychologically important 17000 level.

Reliance Industries, Infosys, ICICI Bank, HDFC Bank and TCS contributed the most to losses. IT stocks remained under pressure, a day after TCS’ fiscal second quarter earnings beat Street expectations on most counts.

Losers outnumbered gainers, with the advance decline ratio at 0.46 on the BSE. Cash market volumes on the NSE were 17% higher compared to Monday but 5% lower than the average of last 10 days. All the sectoral indices ended in the red with Nifty realty (-3%), metal(-2.2%) and media (-2%) the major losers.

Foreign portfolio investors sold shares worth `4,612 crore on Tuesday, provisional data showed. In the year to date, the investors have net sold shares worth $22.5 billion.

“There is pessimism in the markets as weak global economic outlook along with the pressing geo-political tension and the dangling rate hike worries has given investors the ammunition to exit equities at will. Also, the US FOMC minutes outcome later this week is already making investors nervous on concerns that the Fed could be going more rate hikes to keep a leash on rising inflation menace,” said Shrikant Chouhan, head of Equity Research (Retail), Kotak Securities.

“The pressure on the IT pack combined with a slide in index majors across sectors weighed on sentiment. As we’re not seeing any respite on the global front, any disappointment on earnings or the macroeconomic front may put further pressure on the indices,” added Ajit Mishra, VP – Research, Religare Broking.

The International Monetary Fund on Tuesday cut to its GDP growth forecast for India by another 60 basis points to 6.8% for FY23. This is below the projections of 7% made by the Reserve Bank of India.

“We are going through a cycle of heightened global news flow, events and uncertainty. Financial conditions have tightened following aggressive monetary policy action across the world to combat surge in inflation. This has caused higher volatility in financial markets and the dollar has strengthened to a two-decade high… We believe that central banks all over the world, will have to loosen their tough and aggressive rate hike plans to ease this upheaval in financial markets,” said Sunil Singhania, founder, Abakkus Asset Manager, in a recent note to investors.

Asian indices such as Nikkei and Hang Seng fell more than 2% on Tuesday, while the Taiwan Weighted was down more than 4%. Tech stocks were under pressure after import limits were imposed by the US on semiconductor and chip-making equipment.

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The short-term trend of Nifty remains weak and the downside momentum has started to pick up from the lower highs, said analysts.

“One may expect Nifty to slide down to the important support zone of around 16,800-16,700 levels in the next few sessions, before showing another round of upside bounce from the lows. Immediate resistance is placed at 17130-17150 levels,” said Nagaraj Shetti, Technical Research Analyst, HDFC Securities.