Key equity indices ended the five-day winning run and retreated. As analysed by FE on Tuesday, the upward movement on the first two days were more of a technical short-covering than a positive long position-oriented gain.
At higher levels, there was some sustained profit taking and this was bound to happen as the market had gained 18% in the past five trading sessions. Traders with cash positions booked profits gladly, said a trader. The 30-share Sensex of the Bombay Stock Exchange (BSE) lost 511.11 points or 4.81% and closed the day at 10,120.01 points.
Anil Advani, head of research at SBICap Securities, said, ?There were two major events which impacted the markets negatively on Wednesday, and one was the profit booking after the 5-day winning streak. Apart from that, news that Reliance shut five polyester and petrochemical plants at Patalganga also had a major impact on the market.? Reliance plunged 12.76% or Rs 185.75 to close the day at 1,269.45 points. The broader S&P CNX Nifty of National Stock Exchange (NSE) was down by 147.15 points or 4.68% and ended the day below the 3,000-mark at 2,994.95 points.
The markets opened the day with a positive gap tracking the cues from the US markets and steady Asian markets. However, later during the trading session, the market was not able to hold the same momentum and started losing ground. Further, it slipped more and continued to trade in deep red till the end of session on aggressive selling pressure mostly during the last trading hours.
?We assume that the sentiments of the market are going to remain negative for the next few weeks and markets are going to remain volatile. If we witness some consistent buying by the foreign institutional investors, then only there might be some good news for Indian equity markets,? added Advani. FIIs who were net buyers on three consecutive days were net sellers to the extent of Rs 93 crore. Now, this is much lesser than the average Rs 250 net selling witnessed in October.
However, the put and call ratio remains above 1 at 1.07 for Nifty options and this indicates that the selling sentiment is higher. Moreover, the India VIX or volatility index at 67% is also extremely high and it would require to be in the 30 to 40% zone to indicate stability, say traders. Overall the breadth of markets remained negative through the trading session as out of 2,638 stocks traded on BSE, 1000 stocks advanced, 1565 stocks declined while 73 remained unchanged.