Sensex pares steep loss on firm European cues

After a turbulent previous week and an anxious weekend, the Indian equity indices ended in the negative terrain, starting off the new week on a sour note. The NSE Nifty extended its losing streak to a third straight trading session amid sustained selling by FIIs as they continue to be risk averse amid uncertainty over the eurozone credit crisis and economic slowdown in the US.

Finally, the BSE Sensex ended at 16,051, dropping 111 points. It had earlier touched a day's high of 16,209 and a day's low of 15,801. It opened at 16,209. The NSE Nifty closed at 4,835, down 32 points.



The overseas investors have been net sellers for the past several days. They have net sold Indian stocks to the tune of ~Rs 15bn this month so far. The domestic funds have been unable to counter the selling of FIIs. The DIIs have pumped in ~Rs 6.5bn during the month so far.

Globally, the US markets managed to stage a recovery from their day's low on Friday. But, Asian markets were under pressure today with the Hang Seng and the Nikkei index down 1.5% and 2%, respectively.

European equity indices were the top performers today with key continental indices surging 1-3%. Markets in Europe were boosted by speculation about a possible interest-rate cut by the European Central Bank (ECB) as well as hopes of an effectivesolution to the debt crisis.

After falling below the 4800 levels in early trades, the Nifty managed to recover from day's low only to close below the neckline support of 4850. Technically, a hammer is construed as a bullish pattern, but the same would be confirmed if the Nifty opens above 4880 on Tuesday. Else, the downtrend could continue which would extend towards 4600 in the near term.

Hence, one must be careful and guarded in approaching the markets in the near term.

"Investors are likely to remain jittery until the eurozone manages to seal an effective and acceptable rescue plan for Greece. It also remains to be seen whether leaders in the US and Europe will set aside political differences to prevent another recession in their backyard.

Back home, the UPA II continues to be under pressure owing to the 2G scam. A sliding rupee is adding to the list of macro-economic challenges. We continue to urge caution given the uncertain backdrop. Things may turn bit more volatile ahead of the F&O expiry on Thursday. Market players would look for emergency steps from the policymakers to cushion the blow on India from any untoward development(s) overseas.

Absence of bad economic news from the US this week may perhaps help improve the morale a wee bit," says Amar Ambani, Head of Research, IIFL - India Private Clients.