Nifty#39;s 100-point fall opens room for traders to go short

It turned out to be terrible Tuesday! It was a roller coaster ride for investors as Nifty, which started trading with a gap on the upside, failed to hold onto the gains and closed the day with losses of over 100 points while Sensex plunged more than 300 points.

Investors lost more than Rs 1 lakh crore in terms of market capitalisation in a single session. The average market capitalisation of BSE listed companies fell from Rs 150.37 lakh crore on May 6, to Rs 149.11 lakh crore on May 7 which translates into a fall of Rs 1.26 lakh crore.

The index closed below its crucial support placed at 11,550-11,500 levels. It appears to have registered a consolidation breakdown from its 19-day old range present around 11,850 – 11,550 levels. The recent fall has now opened room for traders to go short.

The S&P BSE Sensex finally closed 323 points lower at 38,276 while the Nifty50 was down by 100.35 points to end at 11497.

“Selling pressure intensified in the last couple of sessions but this time around we have seen selling pressure with huge OI buildup. On Tuesday, we broke below 11,500 levels which hold a large amount of Put writing and with breach of the said level will lead to a lot of unwinding,” Ashish Chaturmohta, Head of Technical and Derivatives at Sanctum Wealth Management told .

“On the downside, traders can expect 11,200-11,250 in the next couple of trading sessions and a stop loss could be placed around 11,600,” he said.

The broader market indices BSE Midcap & Smallcap fell broadly in line with the benchmark. Amongst the sectoral indices, IT, Capital Goods and Consumer Durables ended with marginal gains.

While selling pressure was witnessed across all the other sectors with banks, telecom, metals, and oil & gas being the top losers – all down 1.3-2.4 percent.

Stocks in news:

ICICI Bank fell nearly 4 percent after the private sector lender on May 6 reported a 5 percent drop in its fourth-quarter profit to Rs 969 crore, missing estimates after being hit by a rise in expenses and a higher accumulation of bad loans.

IOC, BPCL, HPCL down over 2 percent on volatility in crude oil prices which is mainly due to the US sanctions on Iran and OMCs are facing the brunt of this movement. “Crude Oil prices are inversely proportional to OMCs and any up move in the oil price can cause a sharp decline in the shares of these OMCs as oil is their primary raw material,” suggest experts.

Sterlite Technologies rose 6.6 percent intraday but closed higher by about 1 percent after the company in its press release said that the promoter group has reached an in-principle agreement with lenders to remove pledge by July 2019.

“Anil Agarwal group promoters have pledged 52 percent of the total shares and this overhang should re-rate the stock which is otherwise very attractive from a valuation perspective,” Umesh Mehta, Head of Research, Samco Securities Ltd said.

Marico rallied 5 percent on May 7 after the homegrown FMCG major posted over two-fold increase in consolidated net profit at Rs 405 crore for the fourth quarter of 2018-19, aided by one-time write-back of tax provisions amounting to Rs 188 crore.

VIP Industries declined nearly 3 percent after the company reported weak numbers for the quarter ended March 2019. The company’s consolidated Q4FY19 net profit was down 28 percent at Rs 25.3 crore against Rs 35 crore in a year ago period.

Global Update:

Asian markets ended mixed amid renewed trade tensions between the US and China. China’s Shanghai Composite was up 0.7 percent and Hong Kong’s Hang Seng gained half a percent while Japan’s Nikkei fell 1.5 percent and South Korea’s Kospi lost 0.88 percent.

European markets were trading lower at the time of publishing this copy. France’s CAC, Germany’s DAX and Britain’s FTSE were down 0.5 percent to 1 percent.

Oil prices traded lower with Brent crude oil futures falling 1 percent to USD 70.55 per barrel.