Bears had a strong control over Dalal Street in the week ended October 29 with the benchmark indices witnessing the biggest weekly fall in last eight months as global brokerage houses – Morgan Stanley and Nomura – downgraded Indian equities to equal-weight and neutral, respectively, from overweight due to expensive valuations.
The BSE Sensex fell below psychological 60,000 mark, declining 1,514.69 points to 59,306.93, and the Nifty50 broke 18,000 levels, down 443.25 points to 17,671.65, continuing downtrend for the second consecutive week.
The coming truncated Diwali week is going to see a lot of events including earnings, US Federal Reserve meeting, monthly auto sales and PMI numbers.
“We are seeing profit taking for the last two weeks and indications are pointing towards a further slide.
The US Federal Reserve Policy meeting, which is scheduled to be held on November 2-3, is important to watch out for given the possibility of beginning of bond tapering in mid-November.
“The news flow and market sentiment may be largely dominated by the upcoming FOMC meeting.
The movement of US dollar index and bond yields will be closely watched in the next week, given the Federal Reserve policy meeting.
“Rupee traded in a range near 74.90 as dollar index and Crude prices started glued, eyeing next week’s FED’s statement on tapering updates which would give further direction to Dollar prices and related currencies.
The FII flow was one of the major reasons for correction in the week gone by as they have started taking profits off the table given the high valuations and downgrade of Indian equities by global brokerages.
Foreign institutional investors have dumped Rs 15,700 crore worth of Indian equities in the week ended October 29, taking the total outflow to Rs 25,572 crore in October month.
The primary activity will remain strong in the coming week too, as three IPOs – Policybazaar, Sigachi Industries, and SJS Enterprises – will open for subscription on Monday and will close on Wednesday.
The shortage of semiconductors, and rising commodity prices are expected to impact sales, though there is a support from festive season.
The fear of coronavirus gradually seems to be easing further, considering the data seen in the month of October.
The recent all-time high of 18,604 of October 19 could now be considered as an important top reversal for the market and that is not going to be challenged in a hurry,” said Nagaraj Shetti, Technical Research Analyst at HDFC Securities.
On the upside, 40,000 will act as an immediate and strong hurdle while 40,500-41,000 will be the next hurdles,” said Santosh Meena of Swastika.
Option data indicated that the Nifty could be in a wider and bigger trading range of 17,200 to 18,300 levels in coming days.
“From a rollover perspective, Nifty November series has started with little over 10 million shares, which is relatively low compared to the last couple of months.
“Volatility index has tested it monthly highs near 18.5 percent before closing the week around 17.5 levels on the back of closure among Put writers.