MUMBAI: Indian investors became poorer by nearly Rs 7 lakh crore on Monday with the bellwether Nifty closing at its lowest level in 11 months, rocked by fears of the US Fed hiking rates more aggressively after retail prices in May rose by 8.6% against market anticipation of 8.3%.
The Nifty closed down a whopping 427 points or 2.64% at 15,774.40 and the Sensex by 1,457 points or 2.68% at 52,846.70, dragged down by IT, banks, financial services and metals. Index heavyweights, which dragged down Nifty included the Bajaj twins, IndusInd, TechM and ICICI Bank, which fell 4.5-7%. Nestle India and Bajaj Auto were the only two Nifty 50 stocks that ended in the green.
Fear gauge Vix closed by a mammoth 14.25% to 22.37, signalling heightened uncertainty ahead of the FOMC meeting outcome on June 15. A reading above 20 is negative. The negative sentiment spread to other assets with the 10-year benchmark government paper yield jumping to an over three-year high of 7.6% and the rupee closing down at an all-time low of 78.03 to the dollar.
FII selling was behind the rupee fall. FIIs sold a provisional Rs 4,164 crore worth of shares on Monday, taking their overall sales this calendar to Rs 1.88 lakh crore. Their sales are expected to continue. The major support on Nifty kicks in at 15,500 and resistance at 16,000. “Technically, if the Nifty breaks and closes below 15,700, it will be a major downside event for the market,” said Shrikant Chouhan, head of equity research (retail) at Kotak Securities.
“In such a situation, the index would fall to the level of 15,500-15,400 in the short term. It is advisable to reduce a weak long position below the 15700 level. Also, Bank Nifty could drop to 32,000 level if it ends below 33,500.” The Dow Jones traded 2.25% lower at the time of writing while the SGX Nifty traded 56 points lower at 15718. The market could test its March low of 15671, before breaking lower in the days ahead.
“The risk-off mode in equities globally after the US inflation print raised fears of an aggressive rate hike and the Dollar Index at 104 seem to weigh heavily amidst relentless FII selling despite local redemptions in May coming in at a two-year low,” said S Ranganathan, research head at LKP Securities.