Sensex sinks on profit taking…Broader market dives

In a rare development, the Indian market saw a major fall on Wednesday, with the NSE Nifty sliding by over 100 points and the BSE Sensex losing nearly 300 points. This was the second worst day for the Indian indices this year after Jan.30. Negative closing has been few and far between this year as robust FII inflows have lifted Indian shares on most days. However, today was clearly a day of correction going by the sheer intensity of the selling. What’s worse, the selling came on strong trading volume ahead of Thursday’s F&O expiry.

After opening near day’s high, the main Indian markets turned lackluster before a sudden wave of selling hit the indices in the afternoon. The ferocity of the selling spooked the traders, who preferred to take some profits after a seven –week winning streak. Today’s fall was led by the Realty index, which lost a whopping 6.7%. It was followed by the Consumer Durables index, it was down 5%, while the BSE Metals and the BSE Banking index lost 4.2% and 3.2% respectively.



Technically, the NSE Nifty has witnessed a bearish engulfing candle stick pattern, indicating a trend reversal. Is today’s selling a bear trap or will the bears have an upper hand from here on? This will be confirmed tomorrow when the markets open. If the Nifty opens with a positive bias it would be a bear trap. On the flip side, if markets open in the red, then the selling pressure may get extended. In addition, the rising support line extended from the trough of 4695, hit on January 9, continues to be intact. So, all eyes would be on tomorrow’s opening.

Finally, the Sensex ended at 18,145, down 283 points or 1.5% from the last close. It earlier touched a day's high of 18,523 and day's low of 18,096.

The Nifty settled at 5,505, down 102 points or ~1.8%. It hit a day’s high of 5,630 and day’s low of 5,491.

The BSE Mid-Cap index and the BSE Small-Cap index lost ~3.4% and 3.2% respectively.

The Advance-Decline ratio on the BSE was in favor of the bears. On the BSE, 2208 stocks declined against 769 advancing stocks. While, only 106 stocks were unchanged.

"The ongoing buoyancy in equities has its roots in the ECB’s LTRO and loose monetary policies of other central banks. The ECB is scheduled to unveil another LTRO later this month. Back home, retail level inflation is still elevated. Crude prices too remain uncomfortable. Liquidity continues to be tight, stoking speculation of another CRR cut in March. A rate cut may take a while to materialise. The Union Budget is another domestic event to look forward to in the coming days apart from the outcome of UP elections," says Amar Ambani, Head of Research, IIFL.

Coming back to today’s session, the sudden and sharp fall in the afternoon came after the European indices erased early gains. Most European benchmark was down following the release of disappointing data on manufacturing and services PMI. Private-sector activity across the 17-nation eurozone contracted unexpectedly in February, according to a preliminary Markit purchasing managers index (PMI) for the region. The index declined to 49.7 from 50.4 in January.

Most Asian stock indices recovered from session lows to end higher, with Japanese stocks pacing the advance on the back of weakness in the yen.

The Nikkei Stock Average in Tokyo closed up by ~1% at 9,554 while Australia's S&P/ASX 200 closed flat at 4,293.10. The Kospi in Seoul was up ~0.2% while the Hang Seng in Hong Kong rose 0.3%.

The Shanghai Composite Index was up ~1% after an encouraging flash China manufacturing PMI boosted the sentiment.

China’s manufacturing sector output may shrink for a fourth successive month in February, provisional data released by HSBC showed today.

The preliminary 49.7 reading of the index from HSBC Holdings Plc and Markit Economics today compares with a final 48.8 in January. A reading below 50 points to a contraction.

One must bear in mind that China's economic statistics for January and February tend to be distorted by a weeklong Chinese holiday.

Most Asian stock indices had started the session in the red amid concerns about elevated crude oil prices and skepticism surrounding the second bailout package for Greece.

Greece will receive more financial assistance from its European partners. However, doubts over the effectiveness of the latest Greek rescue plan.

Meanwhile, the Dow industrials briefly rose over 13,000 yesterday for the first time since May 2008 but the advance lost steam after crude oil prices touched a nine-month-high. The Dow last closed above 13,000 on May 19, 2008.