BSE Sensex and Nifty 50 tanked nearly 2 per cent on Thursday, a day of weekly F&O expiry. S&P BSE Sensex nosedived 1,618 points from day’s high to 51,524, while NSE Nifty fell below 15400, to 15,369.80 levels. Analysts say that weaker global cues following the steepest interest rate hike by the US Federal Reserve has caused jitters in all global equity markets. “Below 15,650 market to remain in strong bear grip. We seem to be headed for 15,000-14,800 on the downside,” said Rahul Sharma, Director & Head – Research, JM Financial.
The bounce back in the equity markets failed sooner than expected, and the bearish breakdown was witnessed, Sharma added. In an attempt to tame inflation, The US Federal Reserve, increased interest rates by 75 basis points on Wednesday. This was the biggest rate hike since 1994 as the Federal Reserve tried to curb rising prices with inflation at a 40-year high in the US. The target range for the federal funds rate was increased from 1.5% to 1.75%. The US Fed has also signaled that FOMC will keep hiking rates aggressively. US Fed Chair Jerome Powell said that another 75 bps of 50 bps hike could come in the next FOMC meeting.
Rate hikes, quantitative tightening to keep presenting challenges for equities
“The latest US Fed action clearly establishes the primacy of fighting inflation. Rate hikes are expected to continue given the well-entrenched nature of inflationary impulses,” Gautam Duggad, Head of Research, Motilal Oswal Financial Services, said. Duggad added that a combination of rate hikes and quantitative tightening will keep presenting challenges for equities. “Stock selection and valuation thus acquire even greater importance to navigate this treacherous terrain,” he said.
Auto, Defence stocks among top bets
Vishal Wagh, Head of Research, Bonanza Portfolio said that the extreme fear is dragging the markets down, and this has been witnessed earlier in February and March 2019 as well. “So, this is a good buying opportunity specifically for the leading sectors like Auto and Defence. The market may continue its downward journey and 14500-14800 looks very nearby but the bounce may be equally stronger once weak hands give up on their portfolios,” Wagh told FinancialExpress.com.
Where is Nifty headed?
AR Ramachandran, Co-founder & Trainer, Tips2Trades, told FinancialExpress.com that technically, if NSE Nifty 50 closes below 15660, then in the coming days markets could witness 15240 and 14890 levels as well.
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