The raging fight between the bulls and the bears continued in the stock markets on Monday as benchmark indices Sensex and Nifty nosedived yet again after gaining some ground last week.
The Sensex fell by 1.65 per cent or 949 points to close at 56,747 and the Nifty by 1.65 per cent or 284 points to close at 16,912 as foreign portfolio investors continued their selling spree.
The rupee also plunged 33 paise to settle at 75.45 against the US dollar as market sentiment was weighed down by concerns over the Omicron variant. Chinese property developer Evergrande’s warning that it may default on payments also played into the bearish theme.
All eyes on RBI
In the coming days, traders will be focussed on signals coming from the Reserve Bank of India as it begins its three-day deliberations to decide on the benchmark interest rates amid the global Omicron scare.
“As the street awaits the RBI stance on interest rates, the Nifty sold off below 17,000 today as bears held the upper hand. FII selling continued with no respite despite accumulation seen today in high-quality financials by local investors,” S Ranganathan, Head of Research at LKP Securities, said.
If the RBI refrains from hiking rates, it would be the ninth consecutive instance of it maintaining a status quo. The central bank had last revised the policy rate on May 22, 2020, in an off-policy cycle to perk up demand by cutting the interest rate to a historic low.
Based on indicators, analysts are of the view that markets have been in the oversold zone after the sharp fall in November.
The Sensex and Nifty had declined by nearly 10 per cent from their peak levels. On Monday, the markets also reacted negatively to a news report that the I-Tax department was sending scores of notices of FPIs to cough up more taxes on their capital gains after denying set-off and tax treaty benefits.
FPIs on selling spree
FPIs sold shares worth ₹3,361 crore in the cash segment. They also sold futures to the tune of ₹1,155 crore. For the month so far, FPIs have net sold stocks worth ₹ 10,393 crore in the cash segment and ₹2,435 crore in the futures segment.
The fall in India’s market did not reflect the positive sentiment in the global markets. European markets were trading with gains of 0.5-1 per cent and the Dow Jones futures was ruling 0.5 per cent higher when Indian markets were open for trading.
“The markets have rallied in the past 18 months but that does not mean they will fall only because of the gains achieved. The relative strength index (RSI) of Sensex and Nifty is currently around 22. RSI below 30 is often cited as a catalyst for a reversal in trend since it shows that more people were selling shares. It means strong hands are accumulating,” said Kishor Ostwal, MD, CNI Global Research.