Share Market Fall: After the initial rise, Indian stock markets witnessed strong profit booking on Thursday 22 January. Sensex and Nifty started the day with gains amid strong signals from global markets, but within a few hours investors started booking profits at upper levels. Due to this, both the indexes came down much below their day’s high.
At around 9:48 am, Nifty was trading at 25,430.3, up 1.09 percent. Whereas BSE Sensex jumped 1.03 percent to reach 82,751.95. This rise came after US President Donald Trump backed down from his soft stance on Greenland and the threat of imposing tariffs on European countries. However, this momentum did not last long.
As trading progressed, the stock market witnessed selling at higher levels and the Sensex fell by more than 700 points from its day’s high, while the Nifty also slipped below 25,200. Around 12 noon, the Sensex was trading at 81,957.39, up marginally by 47.76 points or 0.05 per cent. Whereas Nifty was trading at 25,188.90 with an increase of 31.40 points or 0.12 percent.
There were three big reasons behind today’s sharp ups and downs in the stock market –
1. Profit booking stopped the rise
The biggest reason behind today’s upswing in the stock market was fast profit-booking. The sharp recovery in the market after the decline in the last three trading sessions gave many investors an opportunity to book profits at higher levels. The same trend was seen in banking shares also. Bank Nifty slipped nearly 1 percent from the day’s high. However, around 11 am it was trading with a slight rise. According to market experts, the recent rise was largely the result of short covering and relief rally, hence it was difficult for the market to sustain at higher levels.
Akash Shah, Technical Research Analyst, Choice Broking, said, “The range of 25,250–25,300 has now become an immediate resistance for Nifty. If there is a recovery in the market till this level, then there may be selling pressure. On the downside, the level of 25,000 remains a very important support psychologically and technically. If Nifty breaks strongly below this level, then in the coming times “It may see a further decline to 24,800–24,900.”
According to Akash Shah, at present the momentum indicators remain weak, although due to the oversold situation, a temporary relief rally is possible.
2. Selling pressure from foreign investors continues
Continuous selling by foreign institutional investors (FIIs) has also kept pressure on the stock market. On Wednesday, January 21, foreign investors withdrew money from the Indian stock market for the 12th consecutive day. So far in the month of January, foreign investors have withdrawn about Rs 34,000 crore from the Indian stock market.
Akash Shah said that continuous selling by foreign investors is keeping pressure on the benchmark indices. At the same time, domestic institutional investors (DIIs) are preventing the decline from accelerating completely by buying select stocks. This is the reason why there was no major decline in the stock market, but the rise could not be sustained either.
VK Vijayakumar, Chief Investment Strategist, Geojit Investments Limited, said last week that at the moment it looks like the selling by foreign institutional investors (FIIs) may continue unless there is a major positive trigger for the market to rise.
3. Impact of new labor code on Q3 results
Today, sharp fluctuations were seen in many shares in the stock market after the quarterly results. Shares of Zomato’s parent company Eternal had initially risen by more than 6 percent, but later the stock lost all its gains and went down by about 1 percent. The market was worried that costs related to the new labor code would impact companies’ third quarter profits.
VK Vijayakumar said that many companies have had to make more provisions due to the new labor code, which has affected their December quarter profits. However, he also added that the market will not take this impact too seriously as it is a one-time expense.
4. Rupee within limited range
The Indian rupee opened higher at 91.53 on Thursday and has been trading mostly rangebound since then. The pressure on the Indian currency is still against it. This pattern has been seen repeatedly in recent times, where the rupee has found it difficult to sustain its recovery. Earlier on Wednesday, the rupee had fallen 0.8% to a new all-time low of 91.74 against the US dollar.
What signals are coming from technical charts?
Anand James, Chief Market Strategist, Geojit Investments, says that the rise of Nifty around the level of 25,300 on Wednesday could not be sustained, due to which there was a possibility of slipping downwards. However, the doji pattern formed near the lower Bollinger Bands and the proximity of the 200-day Simple Moving Average indicates that the market may be in for some consolidation or stability for some time. According to him, if Nifty is successful in going directly above 25,300, then further rise from 25,470 to 25,580 is also possible.
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