Sensex ends at 2-month low, Nifty support shifts to 200-day SMA at 16850; use volatility to buy quality stocks

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BSE Sensex and NSE Nifty 50 tanked on Monday amid global growth concerns, and weak cues. BSE Sensex crashed 954 points or 1.6 per cent to settle at 57145, while NSE Nifty 50 index plunged 311 points or 1.8 per cent to finish trade at 17016. Stocks of index heavyweights such as Reliance Industries Ltd (RIL), ICICI Bank, ITC, HDFC Bank, Axis Bank, and Maruti Suzuki India, among others contributed the most to the indices’ fall. Broader markets underperformed the equity market frontliners. S&P BSE Midcap index tumbled 2.8 per cent or 719 points to settle at 24,553, while S&P BSE Smallcap plunged 3.3 per cent or 959 points to finish at 27854. Bank Nifty index plunged 2.35 per cent or 930 points to settle at 39,027. India VIX, the volatility index, jumped 6.3 per cent to finish at 21.89 levels.

Also read: RBI MPC likely to raise repo rate 50 bps to tame inflation; may pause rate hike after Dec monetary policy

Global risk assets including equities extended their selloff on Monday as fears of faster inflation and global recession continued to rise. The Chinese government raised the foreign exchange risk reserve requirements for financial institutions to stem a drop in the yuan, making it more expensive for traders to short the currency. S&P Global ratings has retained India growth outlook at 7.3 per cent for the fiscal year 2022-2023 and 6.5 per cent for the next fiscal year, although it sees the risks tilted to the downside. Nifty has broken the important support of 17166 and now is on the verge of breaking 17000. 16947 and 16794 are the next supports for Nifty while 17166 could be the resistance in the near term.

Shrikant Chouhan, Head of Equity Research (Retail), Kotak Securities

The speed with which central banks across the globe are hiking interest rates, investors are worried that slackening growth would push key economies into recession. With the monetary policy decisions on the anvil, rate-sensitive stocks like banking, realty & auto crumbled badly as rate hikes could dent demand going ahead. However, due to markets being in oversold territory, we could witness a quick pullback rally. For traders, the 200-day SMA and 16850 would act as a key support level. On the flip side 17150 and 17200 could be the immediate hurdle for the bulls.

Also read: S&P Global projects India’s FY23 GDP growth at 7.3%; estimates inflation to fall to 5% in next fiscal

Vinod Nair, Head of Research, Geojit Financial Services

The soaring dollar as a result of aggressive monetary tightening, slowing economic growth and rising demand from cautious investors are causing turbulence in the global equity market. This is creating mayhem in the domestic market led by weakening INR, elevated bond yields and pessimistic trends of Asian peers. Only the IT sector, which exhibited the weakest performance in the last 1yr, defied the trend in anticipation that the global recession is mostly factored in the price and are trading at reasonable valuations.

Mohit Nigam, Head – PMS, Hem Securities

We believe investors should avoid taking riskier positions in the near term as the volatility is likely to continue for some time. Investors should rather use this volatility to accumulate good quality stocks with strong growth visibility and solid fundamentals. On the technical Front immediate support and resistance in Nifty 50 are 16800 and 17400 respectively. Immediate support and resistance in Bank Nifty are 38000 and 39500 respectively.