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Here’s why Sensex crashed 1200 pts today, Nifty below 17000; hawkish US Fed, Russia-Ukraine drag D-St down 2%

The market is jittery on account of possible fiscal tightening by central banks which was holding the economic activities so far. Fed has already signalled a rate hike before March.

Sensex crash nifty crash
Nifty is trying to find its feet near a strong support zone of 16850-16600

Indian equity markets fell more than 2% on Thursday, mainly on hawkish US Fed outlook. While Sensex plunged over 1,200 points to touch intraday low of 56,439, NSE Nifty 50 gave up 17,000 and hit 16,866 intraday. Federal Reserve chairman Powell on Wednesday signalled a rise in interest rates in March and predicted the possibility of an aggressive policy tightening. This led to a jump in the 10-year US bond yields of the US and the dollar index, which is negative for emerging markets including India. Geopolitical tensions between Russia and Ukraine pushed up crude oil prices. Apart from this, the market on Thursday is also facing a monthly expiration date for January Futures and Options (F&O) contracts, which added to the volatility.

Indian equities mirroring volatility in global markets amid hawkish Fed

Parth Nyati, Founder, Tradingo said, “Globally markets are very volatile amid hawkish US Fed and rising geopolitical tension and Indian markets are also facing the same pressure due to heavy FIIs’ selling. If we look at the Indian markets then there are lots of positive triggers that may help our market to outperform but we just need some calmness in global markets. The market is not going into the budget with any euphoria so there is a good chance of a post-budget rally and if we look at the last three years’ trend then the Market corrects ahead of budget then it witnesses a post-budget rally.”

“Nifty is trying to find its feet near a strong support zone of 16850-16600 after a brutal fall. The market was looking much oversold as PCR slipped below the 0.7 mark and FIIs’ long exposure in the index future dipped below 45% therefore a bounceback is due. Technically, 16800 is long-term trendline support and a previous demand zone while 200-DMA is placed around 16600 level therefore we can expect a pullback rally from here. On the upside, the 17500-17600 area will be the first resistance zone while above 17800, we will get confidence that the market has reversed and is ready to go higher,” Nyati said.

Amidst rising volatility, long-term investors should not worry

Gaurav Garg, Head of Research, CapitalVia Global Research Ltd told Harshita Tyagi of Financial Express Online: “Markets have opened very negative today amidst rising concerns on global inflation along with US Fed has indication that the interest rates are likely to rise. Overall, the plan to do so by Fed, is slightly faster than expected amidst rising COVID cases because of new variant. Higher Crude prices is another factor which is concerning the Indian equities. Also, majority of the companies have declared Quarterly results for Q4 and we have seen lower margins due to higher raw material prices. At the same time, FIIs have been selling relentlessly which has dragged the market. In January month alone, till date more than Rs 26,000 crore worth of selling has been witnessed and January is going to be 4th consecutive month of FII selling.”

“Amidst rising volatility in Indian equity markets, long-term investor should not worry. They should keep on accumulating quality stocks which are now available at good 10-15% correction. Investors/Traders who are looking for swing opportunities should avoid the market as of now, as high degree of volatility is expected, at least till budget session”. he added.

Nifty may face a support near 16500 -16200 levels

“The market is jittery on account of possible fiscal tightening by central banks which was holding the economic activities so far. Fed has already signalled a rate hike before March this year and other central banks are also pondering to take similar steps to curb the rising inflation. The drainage of liquidity has already started as FIIs are pulling money out of the markets. The ongoing political tension between Russia and Ukraine is also keeping pressure on the investors’ nerve. All these factors are draining the investors confidence and hence this sell off has triggered. Nifty may face a support near 16500 -16200 levels till then the downtrend will continue,” said Ravi Singh, Vice President & Head of Research, Share India.

Investors should consider such a fall as a buying opportunity for the short to medium term

“The Indian stock benchmark tumbled nearly 2 percent on Thursday morning, triggered by weakness in the broader market after the hawkish FED outlook. The FED chair Jerome Powell signaled it is likely to raise U.S. interest rate in March, after that we witnessed a sharp up move in dollar index & 10 year US bond yield, which is negative for the emerging markets. Indian Rupee is also depreciated by 0.5% against the dollar. Indices like Nifty IT, REALTY & PSUBANK were trading at a loss of almost 3%. Smallcap & Midcap index dragged around 2%,” said Sumeet Bagadia, Executive Director, Choice Broking.

“Along with the above aspects, the Indian investors are also keeping an eye on the upcoming Budget, which could be the positive trigger for the market. Hence, the investor should consider such a fall as a buying opportunity for the short to medium term. Technically, the nifty index has taken an immediate support at Rising Trendline & 78.2% Retracement Levels of its prior rally on the daily chart. A momentum indicator Stochastic is also trading near oversold territory that suggests further reversal in the near term. Nifty is finding support at 16800 levels while resistance is at around 17150 levels, crossing above the same can show 17400-17600 levels,” he further said.

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