Market Wrap: Dalal Street ended in deep red amid a weak global market, persistent FII outflows

It was a gloomy week for Indian equity markets. Frontline indices - Sensex and Nifty -  lost over two and a half percentage points as investors were concerned over the US FOMC minutes that suggested further rate hikes by the Federal Reserves, the central bank of America. Rising geopolitical tensions also contributed to the selloff after Russian President Vladimir Putin threatened to increase the attacks on Ukraine. These signals led the BSE Sensex to decline 1,539 points, or 2.5 per cent, at 59,463.9 during the week ended February 24, while the Nifty slipped 478.4 points, or 2.7 per cent, to 17,465.8.

Vinod Nair, Head of Research at Geojit Financial Services, said the domestic market witnessed continuous selling during the week on the back of a weak global market and persistent FII outflows. He said the global bourses were cautious as the US PMI numbers came in better than expected on the heels of strong jobs data and raising fears of aggressive Fed action. "The minutes of the central bank policy meeting also revealed concerns over high inflation and its commitment to bring inflation under control. In response to the heightened fears of rate hikes, the US 10-year Treasury yield moved near 4 per cent."

Additionally, Nair said, the dollar index rose as the greenback cheered over hawkish Fed comments and rising geopolitical tensions. "The resurgence of the cold war between the US and Russia has also brought apprehension to the market. Although it should be a short-term effect, the fear of sanctions against Russia and its degree of implication on the economy, especially food and oil exports, is adding to the anxiety. India’s Q3FY23 GDP growth, scheduled to be released next week, is anticipated to moderate from 6.3% in the preceding quarter," he added.

Just four stocks in the Nifty 50 index delivered a positive return for investors in the week. With a gain of 3 per cent, Divi's Laboratories emerged as the top gainer in the index. It was followed by NTPC (up 1.6 per cent), Power Grid Corporation of India (up 0.6 per cent), and ITC (up 0.4 per cent). Cipla, JSW Steel, and Mahindra & Mahindra declined 6.1 per cent, 5.8 per cent, and 4.5 per cent, respectively. Bharat Petroleum Corporation, HDFC, HDFC Life Insurance, Larsen & Toubro, UPL, Grasim Industries, and HDFC Bank tanked over 4 per cent.

Sector-wise, all the major sectoral indices in the BSE closed in red terrain. the BSE Realty index declined the most (5.7 per cent) during the week gone by. The BSE Metal index was down 3.6 per cent and BSE Power index was down 3.2 per cent.

Devarsh Vakil, Deputy Head of Retail Research at HDFC Securities said it was 6th consecutive lower close for the Nifty at 17465. "Breadth continues to remain poor and midcap and small-cap indices also closed lower for the day.  Nifty is marching towards its 200 days of SMA support, placed at 17368. Budget day low is placed at 17353, which coincides with 200 days SMA support in Nifty.”

Vakil said Nifty Midcap Index has got strong support at 29800, derived from horizontal trend line on the medium-term charts. "The Nifty Small cap Index has got crucial support at 9150 odd levels. Breaking of these supports in Mid and Small cap indices could intensify the selling in the broader markets. Cash segment turnover continued to remain on the lower side, as NSE cash segment volumes were lowest since 15 June 2022,” Vakil Added.

Kunal Shah, Senior Technical Analyst at LKP Securities, said: "The Bank Nifty index is stuck in a broad range between 39500 and 40500 however the undertone remains bearish and one should keep a sell-on-rise approach. The index has been trading in a downtrend with lower high and lower low formation intact. The index will witness large moves once it breaks out of the mentioned range. The momentum indicator RSI is trading below the level of 30 which confirms the weakness."

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