By V K Sharma
The markets have fallen for six sessions on the trot! Foreign institutional investors (FIIs) still continue to sell, albeit at a slower pace than October. As compared to sales of Rs 1,14,446 crores last month, so far, they have sold stocks worth Rs 29,533 crores in the current month.
The DIIs have almost matched them with net buying of Rs 1,07,255 crores and Rs 26,522 crores, respectively.
Thursday’s market close didn’t inspire much confidence as the Nifty lost 0.11% for the day and 2.55% for the holiday-shortened week. And to make matters worse, it closed below its 200-day exponential moving average (dema), a level it had hit on the past two bottoms of June 4, 2024 and October 26, 2023, (not depicted in the chart).
One can give the markets some benefit of the doubt as it has not closed below the trendline (no 31) as depicted in the accompanying daily chart of the Nifty. This downward-sloping trendline was drawn by joining the lows of October 7 and 25. Since the trendline is downward sloping, not violating the trendline does not guarantee a reversal. For that to be established, the Nifty must close above the trendline no 32, which is made by joining the highs of October 15 and November 7. That is a tough ask at this point in time.
Meanwhile, the US markets have also lost substantial ground this week. The Dow Jones Industrial Average slipped 1.24%, the S&P 500 fell 2.08% and the Nasdaq slumped 3.15%.
While the fall can be attributed partially to normal profit-taking, it was largely on account of the Fed turning hawkish as the incoming economic data was strong.
US retail sales rose more than expected in October, rising 0.4% last month against expectations of 0.3% growth. Import prices in the US also unexpectedly rose in October, rebounding 0.3% as against a decline of 0.4% decline in September.
This strong economic data has forced Fed Chair Jerome Powell to say that the Fed is in no big rush to cut rates. The expectations of a rate cut at the December meeting of the FOMC have now plummeted to 55% from 88% earlier. The treasury markets also took note of Powell’s comments, with the yield on the 10-year note touching a six-month high on Friday.
There are only four working sessions this week as the markets are closed on Wednesday, November 20, as Maharashtra goes to polls. Channels will air their exit poll findings after 6 pm on the same day.
The markets are oversold. The Nifty is down 10.44% from its all-time high. At such a time, if FIIs were to revisit their China strategy, as some FIIs have indicated, the tide could in fact turn for India!
The writer was head of market PCG and Capital Market Strategy, HDFC Securities
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