Although a decline in prices of various commodities, including brent crude, is regarded as good news for corporate India, a simultaneous slowdown in global equity markets may continue to weigh on the Indian markets. As major global indices, like Dow Jones Industrial Average (US) and FTSE 100 (UK), fell below their two-to-five-year upward trendline, Indian benchmarks too, have come under selling pressure. Crude prices are currently seeing their sharpest fall since 2008 crisis. In last one month, MSCI World and MSCI emerging market indices have shed 7-10% and fallen below their respective 100- and 200-day moving averages (DMAs). Generally, for any security or index, a decline below its 200 DMA or below a trend channel is regarded as a bearish development.
Click here for graph
Even Sensex has moved closer to the lower end of a trading channel it formed in last four months. Although the index is trading above its 100 DMA (currently at 25,856), the caution among investors is well reflected in the falling momentum in FII buying. The 15-day average net FII buyings fell to $34 million on Friday. Chartists now consider 26,000-25,500 as a key support for Sensex, a fall below which may bring in substantial correction for the 30-share index.