A trader at a computer monitor at a brokerage firm in Mumbai, India. (Photographer: Dhiraj Singh/Bloomberg)

What To Read From A Session That Saw No Attempt At An Intraday Recovery


The Indian markets made a sharp corrective move on Tuesday, led predominantly by public sector banks and Bharat Petroleum Corporation Ltd. The market breadth continued to be weak, and nowhere during the trading session was there a move suggesting an attempt to stage a recovery.

PSU banks led the charge downwards, on reports that the Reserve Bank of India had asked lenders to set aside additional capital against stressed assets, putting further pressure on the already beleaguered sector. The Bank Nifty corrected 1.3 percent and the Nifty PSU Bank Index was down over 3.5 percent.

What To Read From A Session That Saw No Attempt At An Intraday Recovery

The correction in oil and gas stocks has been underway slightly ahead of the corrective move in markets, but a further fall cannot be ruled out. These stocks need crude and gas prices to stop falling, and until that uncertainty goes out, there is no saying how much lower can they fall. Flat earnings growth and poor capital allocation are anyway plaguing oil marketing companies like Indian Oil Corporation Ltd., Hindustan Petroleum Corporation Ltd., and BPCL, and there is no saying when the fall will get arrested.

The near-term may well be dominated by technical chatter.

I spoke to a couple of eminent technical analysts and they believe that there are some crucial levels that people should monitor. 9,410 on the Nifty is the weekly moving average and 9,350-9,360 are important levels from technical parlance because those levels are both a swing high and a corrective pullback low. Breaks below these can be painful in the short-term.

A trader also pointed out that the Nifty has not had a single down move of over 4 percent since the surge from 7,900, and that, to him, was an important barometer.

A 4 percent down move from the highs of 9,709 would take the index down to 9,320 levels, which might have appeared outlandish at 9,700, but does seem plausible now.

It’s not the final straw on the camel’s back in the short term. Far from it. Most believe that the ingredients are all in place for the bull market to continue. However, you can’t fault people for being nervous ahead of the rollout of the Goods and Services Tax regime, in an expiry week, amidst a scenario of flat global market moves. Let’s see if the scene improves on Wednesday – expiry weeks in the last six months have been positive.

Niraj Shah is Markets Editor at BloombergQuint.