Indian Equity Markets plummet on Friday - IIFL

Equity markets plummeted on Friday wiping out most of the gains recorded during the week. Nifty erased ~4% gains made during the week to close lower by 1%. The Indian rupee hit a record low of 62 to the dollar on Friday suggesting that slew of measures being taken by the government and the RBI are not proving really effective. Also, concerns that an early rollback of US monetary stimulus would trigger a selloff weighed heavily on Dalal Street.

Meanwhile, Dow saw its biggest loss since June on Thursday after disappointing results from Wal-Mart and Cisco. On the data side, US consumer prices rose broadly in July. New claims for jobless benefits fell close to a six-year low.

Adding to the pressure was Inflation based on the Wholesale Price Index, which shot up to 5.79% in July as against 4.86% in June driven largely by double-digit rise in the prices of food articles. With the results season behind us, market participants would look to international cues for further direction. In US, the Fed is expected to release the minutes of the FOMC meeting.

Markets succumbed to panic selling on Friday as INR hit a new low leading to massive unwinding pressure in the broader markets. Moreover, extremely negative global cues erased three days of gains in Nifty. The trading range of 5,500-5700 was violated on downside. From current levels, every rally is likely to be met with distribution at higher levels. Any move below 5,450 i.e. monthly trendline support could aggravate selling pressure in the near term.

Nifty and Bank Nifty future had seen huge addition of short position. On nifty options front, Huge call writing was seen at 5600 and 5700strike., while put buying was seen at 5400 and 5300strike. We fell Nifty for the week might take support near 5420-5440 levels, while spport for the Bank Nifty future is around 9250. On sector front, we might see some selling coming into defensive like Pharma and IT sector.

Source : Equity Bulls

Keywords