After a tumultuous trading session on Monday, the Sensex closed at a 52-week low of 16,990.18, down by 315.96 points or 1.82 per cent from the previous close. The Nifty closed down by 92.75 points, or 1.78 per cent, to end the day at 5,118.50.
“Most investors have been numbed into inactivity. The sentiment is going to be negative for a while, going forward,'' said Mr Prakash Diwan, Head of Institutional Client Group, Asit C Mehta Investment Interrmediates.
FIIs were net sellers at Rs 1,385.78 crore (BSE and NSE) while the DIIs were net buyers for Rs 1,320.38 crore. On the BSE, retail investors, who have been increasingly withdrawing from the market, were net sellers for Rs 27.79 crore.
“While India will not remain immune to any global contagion in response to the S&P downgrade, we do believe that a full-blown capitulation by FII's looks relatively low,” Deutsche Bank analysts Mr Abhay Laijawala and Mr Abhishek Saraf said in a research report.
US, Europe turn weak
The Sensex and the Nifty opened 2.5-odd per cent down from their previous close. The Sensex opened at 16,907.57 points, down 398 points while the Nifty opened at 5,083.85 points, down 133 points. Though trading recovered in the mid-day session, stocks again slumped towards the end as enthusiasm among investors fizzled out.
This is attributable to the fact that the European markets had started falling as the trading day here progressed. All of the major European markets (except the Spanish IBEX 35 Index) had fallen by the time the Indian markets closed. The US indices were ruling weak by around three per cent at 9.00 pm IST.
“Europe had opened firm, bringing comfort to the investors but now the European markets are losing ground and the general feeling is that some impact is still to be felt,” said Mr Diwan.
Fundamentals vs sentiment
Market players say that while the volumes on Monday were ‘decent', there was still some scepticism in the market with regard to the money flow.
“It is not clear where the fresh money is going to come from. The fundamentals for the economy are good and strong, but the market never follows fundamentals, only sentiments,” said Mr Diwan. The total turnover in the cash segment on the BSE was Rs 2,990.96 crore, while that of the NSE was Rs 13,420.86 crore.
Nifty levels
Market experts said that it would take a couple of weeks for the dust to settle down and for clarity to emerge. “If the Nifty does not stay above the 5,000 levels in the next two days, then it could test 4,700 levels in the near future,” said a technical analyst with an Indian brokerage.
Of the Sensex 30 stocks, Hero Moto Corp was up by 4.03 per cent at Rs 1,855.95, while the worst-hit was the DLF stock, which was down by 6.85 per cent at Rs 195.85 per share.
On the BSE, a total of 661 shares advanced whereas a total of 2,199 stocks declined.
SELL-OFF on the cards
There was selling pressure in the F&O segment in the late afternoon, with 75,000 additional call options and 1.25 lakh additional put option contracts, said the head of sales trading at an Indian brokerage house. Investors buying put options to hedge their cash long position, he added.
Surprise on Rupee front
Currency market experts were in for a surprise as the rupee did not appreciate against the Dollar, Euro and the Pound. “Considering the developments of last week, the rupee was expected to go up, which it has not. But this is a short-lived trend, rupee is expected to appreciate from these levels onwards,” said Mr Jatin Jayatilal Damani – Head Currency, Bonanza Portfolio.