Indian benchmarks Nifty and Sensex fell a percent and a half each as investors booked profits from four-month highs amid a stronger dollar , mounting growth concerns on anticipations that US Fed policymakers would sound a hawkish tone at an economic symposium later this week and escalation between Washington and Beijing over Taiwan.
The stock correction, which left investors poorer by Rs 3.9 lakh crore, was led by indices like the Nifty, which fell 268 points to 17490.7 and Sensex, which plunged 872 points to 58773.87. The rupee fell 8 paise to 79.86/USD while the Dow Jones traded 1.2% lower at opening, signalling a global risk-off.
The Bank Nifty was among the worst performing, correcting 688 points or almost 2% to 38298. Tata Steel, Asian Paints, Adani Ports, Tata Motors and JSW Steel were the top index losers, shedding 3-4.5%.
FIIs turned sellers for the first time this month, offloading shares worth a provisional Rs 454 crore as per BSE data. So far through August 19, they had purchased shares worth Rs 46000 crore. In the fiscal year through August 19 (FY23) they have net sold shares worth Rs 56338 crore.
“Consolidation was triggered in the market in anticipation of tighter monetary policy by the FED and worries over a slowdown in global economic activity,” said Vinod Nair, research head, Geojit Financial Services. “The current risk reward is not favouring investors as the Nifty50 is now trading at a premium valuation of 21.5x P/E (1yr fwd basis), above the long-term average. Rising dollar index and higher US10 year bond yield act as the near-term headwinds for the market.”
Monday’s correction was the second straight loss after Friday when the Nifty corrected after falling just 8 points shy of 18000. Market mavens remain mixed on the prospects from here on. While some expect a consolidation within a narrow range until a fresh breakout or breakdown, others believe that the trend has reversed after a 17% rally from the mid-June low of 15183 to 17992 on August 19.
“Leading indicators like RSI showed we were overbought and a correction was due after the sharp rally,” Palviya said, adding, “The correction could extend to 17300 after which the market could consolidate between that level and 17800.”
However, technical experts like Rohit Srivastava of IndiaCharts expect the correction to have signalled a “trend reversal.” He expects markets could test the 15183 low of June over the next couple months.
“Seldom have we seen an over 80% retracement of the fall; it didn’t happen during the 2008 market crash either,” Srivastava said, citing the correction from the record high of 18604 on October 19 last year through 15183 on June 17 this year and the subsequent rally to the high of 17992 on August 19, being an over 80% retracement of the fall from October to June.
Apart from the Nifty not being able to break the 18000 psychological mark, the inability of the broader Nifty 500 to break above its January high of 15795 and April high of 15478 also signalled that a correction was in the offing.