Markets post biggest weekly fall in 6 months; Sensex, Nifty shed 6% from Dec 1st record highs

On Friday, Sensex closed at 59,845.29 nosediving by 980.93 points or 1.61%. While Nifty 50 shed 320.55 points or 1.77% to close at 17,806.80. Overall, on the day, the Sensex dropped by nearly 1,061 points and the Nifty 50 dipped by nearly 348 points.

In the broader market, on BSE, small-cap stocks lost a hefty grip as they tumbled by a huge 1,168.84 points, while midcap stocks too plummeted by 858.44 points or 3.40%. All indexes in broader markets were trapped in deep red with a downside ranging from 2-4% with small-caps being the worst hit. Midcap indexes also recorded their worst day in 10 months.

In regards to sectoral indices on BSE, all sectoral indices also were in the sea of deep red with downfalls ranging from 2% to over 5%. In percentage terms, Utilities and Power indices dived around 5.17% and 4.89%. However, on BSE, the Capital Goods index dipped over 951 points, while the Auto, Bankex, Consumer Durables, Metals, and Oil & Gas indices slipped between 700-800 points. IT stocks as well faced massive selloffs.

Meanwhile, Bank Nifty which had clocked a fresh lifetime high and crossed over the 44,000 mark last week, was in a free fall and even reached below 41,600 levels. After the market hours, Bank Nifty dropped 740.75 points or 1.75% to end at 41,668.05.

In the current week, Sensex declined over 2.4% and the Nifty 50 slipped over 2.5%. This would be their biggest weekly fall in six months. Both benchmarks stand nearly at two-month lows.

On December 1st, 2022, the Sensex touched a new lifetime high of 63,583.07 and the Nifty 50 clocked a fresh historic high of 18,887.60. Since then level, the Sensex nosedived by 5.9%, and the Nifty 50 contracted by 5.7% to date.

Further, on the interbank forex market, the rupee settled at 82.8575 against the US dollar compared to their previous closing of 82.7625. On the other hand, the forward premiums reached to one-month high with the USD/INR 1-year implied yield shooting up to 2.2%. Overall, this week, the rupee ended on a flat note compared to the 82.87 per dollar level of last week’s Friday.

Also, foreign institutional investors (FIIs) turned into sellers on Friday after the previous day’s buying of ₹928.63 crore. On December 23, FIIs pulled out ₹706.84 crore from Indian equities. Overall, in the current week, FIIs sold equity shares to the tune of ₹979.48 crore.

Friday’s frenzy-free fall in Indian stocks came in after global counterparts lost their grip and entered into a panic selloff. Global equities faced a downfall due to renewed fear of a rise in Covid cases in major economies, and the better-than-expected US GDP Q3 data which has further signalled for more rate hikes by the US Fed to tame inflation.

What to expect in the coming week, which is also the last week of December and also the entire 2022 trading year.

Shrikant Chouhan, Head of Equity Research (Retail), at Kotak Securities said, “Domestic equity markets corrected this week reacting to negative global cues. Sensex 30 and Nifty 50 indices corrected ~2% this week, whereas the fall in the BSE midcap and NSE smallcap indices was much sharper. Most of the sectors reported negative returns this week due to broader weakness in the markets. BSE Pharma index was the bright spot as it gave positive returns led by the re-emergence of the covid scare. Globally markets remained volatile as it reacted to reported rise in covid cases in China and strong US GDP data. Brent crude oil price continue to trade around the $80 per barrel mark whereas the US 10-year treasury yield saw some upward movement this week.”

Chouhan added, “Covid case count in China and concern about possible recession will continue to influence global equity market in the near term.”

As per ICICI Direct’s note, Indian equity benchmarks extended their decline over third consecutive week as the sentiments were spooked by the resurgence of Covid cases globally, leading to profit booking. Midcap and small caps underperformed with a cut of 6%.

ICICI Direct’s report added that the acceleration of downward momentum on the breach of 50 days EMA signifies prolongation of corrective bias which may drag Nifty towards key support of 17500. In the process, volatility would remain high owing to monthly expiry as oversold reading would lead to technical pullback, wherein 18300 would act as key resistance.

Also, the stock brokerage’s note said, in tandem with the benchmark, the broader market indices have undergone profit booking. Nifty midcap, small-cap indices have registered a breakdown from their rising channel, indicating extended correction in the coming weeks.

Whereas Apurva Sheth, Head of Market Perspectives, Samco Securities in a technical outlook note said, “Short Term technical setup of Indian benchmark indices has turned bearish and it would be better to stay away from catching a falling knife.”

Technically, on Nifty, Sheth’s note added that the index has formed a lower top lower bottom on the daily chart, which is a bearish sign for the short term. Index on the daily chart has closed below its 9 & 21 – day exponential moving average and RSI on the other hand has drifted below 40 levels with a bearish crossover.

“On the daily chart, India VIX has witnessed a breakout of a falling wedge pattern above 14 levels indicating a higher expectation of volatility. The immediate support for the Index is placed around 17700 levels followed by 17400 levels and resistance is capped at 18200 levels. We would wait on the sidelines and not commit to fresh longs yet,” Sheth’s note added.

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decisions.