A weak headstart to week on Street dragged by banking, financial stocks

A sharp selloff in banking stocks pushed Indian markets for a weak start of the week. On Monday, both Sensex and Nifty 50 tumbled by over half a percent, erasing key psychological levels. Feeble global cues also played a key role for riding bears in domestic equities, as the focus has shifted towards Fed minutes which are expected to give some clarity on rate hikes and also the inflation outlook. On the other hand, the rupee inched up as a slight retreat was seen in the dollar index.

Sensex shed 311.03 points or 0.51% to end at 60,691.54. Nifty 50 tumbled by 99.60 points or 0.56% to close at 17,844.60.

On Sensex, NBFC-giant HDFC was the top loser with Maruti Suzuki share price. Both the stock dipped by 1.33% each. Major banks like Kotak Bank, ICICI Bank, and SBI also dragged with a downside of over 1% each.

Among gainers, Ultratech Cement stock took lead surging by 1.75%. Tech Mahindra, Power Grid, Tata Motors, and Infosys also picked up by 0.6-1.4%.

In terms of sectoral indices, a broad-based selloff was seen with banking stocks taking a massive beating. BSE Bankex dropped by nearly 495 points or 1.06%, while Bank Nifty slipped by 430.05 points or 1.05%.

Oil & Gas and Consumer Durables index also plunged by 197 points and 266 points respectively on BSE.

However, IT stocks outperformed their counterparts and broader markets. BSE IT index surged over 157 points.

Ajit Mishra, VP – Technical Research, at Religare Broking said, “Markets started the week on a subdued note and lost over half a percent, in continuation of the recent fall. After the initial uptick, the Nifty index gradually drifted lower as the day progressed and settled closer to the day’s low. The continuous pressure in the banking and financials pack combined with a downtick in the energy majors kept the tone negative. Meanwhile, the broader indices traded mixed and ended flat to marginally lower.”

Meanwhile, Shrikant Chouhan, Head of Equity Research (Retail), at Kotak Securities said also pointed out that factors such as more pain going ahead through further rate hikes, rising inflation, and the recent Adani saga continue to weigh on investors’ minds.

Also, Chouhan added, Indian stocks are still expensive compared to China, and hence investors are taking this opportunity to curb their holdings.

At the interbank forex market, the rupee edged higher tracking Asian peers as investors await Fed minutes which are scheduled to be presented later in the current week. This led to a pullback in the dollar index. Rupee ended at 82.7225 against the US dollar, compared to last week’s Friday print of 82.83 per dollar.

According to Religare Broking’s expert, the underperformance of the banking and financial majors is largely weighing on sentiment, in absence of any major event. And, indications are pointing towards more pain in banking however resilience in the IT, auto, and select FMCG heavyweights may cap the damage. Besides, the upcoming monthly expiry of the February month derivatives contract would further add to the choppiness. On the benchmark front, Nifty has next support at 18700 levels. Participants should align their positions accordingly.

On Bank Nifty, Kunal Shah, Senior Technical Analyst at LKP Securities said, the BANK NIFTY bears continued to attack at the higher levels and the index witnessed selling pressure throughout the day. The trend remains negative and one should keep a sell-on-rise approach as long the index stays below the level of 41,500 where the highest open interest is built up on the call side. The next support is visible at 40000 where some amount of put writing is visible.

In technical terms, Kotak’s equity research expert said, a bearish candle on daily charts is indicating further weakness from the current levels. However, the Nifty is trading near the 20-day SMA and Sensex is trading near the important support level of 60600. If the index succeeds to trade above 17900, a quick pullback rally is not ruled out. Above this, it could move up to 18000-18125. On the flip side, a fresh selloff is possible only after the dismissal of 17800 and below the same, the index could slip till 17730-17700.


Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decisions.

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