Sensex ends 560 points lower as bears tighten grip; here are 5 factors that are spooking the market

The S&P BSE Sensex plunged more than 550 points while Nifty50 broke below 11,500 levels on July 19.

On the sectoral front, the S&P BSE Auto index led the fall, followed by Realty, Bankex, and consumer discretionary stocks.

Sectors which bucked the trend include power and consumer durables.

We have collated a list of top 4 factors which could be weighing on markets:

FM dashes hopes of a tweak in FPI surcharge:

Foreign portfolio investors (FPis) should consider the option of structuring themselves as companies rather than trusts to avoid paying the increased surcharge announced in Budget 2019, Finance Minister Nirmala Sitharaman said, in a discussion on the Finance Bill in the Parliament on July 18.

FPIs registered as trusts will have to pay the new tax surcharge, Sitharaman said, dashing hopes that the government may tweak relevant portions of the Finance Bill to ring-fence FPIs from the effects of the “super-rich” tax.

So far in July, foreign investors have pulled out more than Rs 5,000 crore from the cash segment of the Indian equity market.

Broader market takes a plunge:

The S&P BSE Smallcap index fell by more than 1 percent while the S&P BSE Midcap index was down nearly 1 percent intraday on July 19.

The broader market has been under pressure throughout this week. On Friday, more than 300 stocks touched their fresh 52-week low including names like Eicher Motors, Maruti Suzuki, HEG, M&M, TVS Motor, Hindustan Zinc, GAIL India, Yes Bank among others.

Weak monsoon progress:

Till July 17, cumulative rainfall was 15.8 percent below normal levels and the weekly rainfall 19.8 percent below normal. On a regional cumulative basis, spatial distribution has been deficient across India.

Out of the 36 sub-divisions across India, till date, 18 have received deficient rainfall, 16 have received normal rainfall, three have received excess rainfall, and one received scanty rainfall, said a Kotak Institutional Equities report.

Technical factors: Nifty broke below 100-EMA

Bears took control of D-Street on July 18 and since then it has pushed the index below crucial support levels. The index failed to hold on to 11,700; 11,650; 11,600 and 11,500 levels.

In terms of important levels, Nifty50 broke below 100-days EMA placed at 11,526 and is now trading near the intra-month low of 11,461 formed on July 9. A break below this level could take the index towards lower levels of 200-DMA placed at 11,125.

“For time being upsides shall remain capped around 11700 levels and hence traders can make use of any bounce to create fresh short positions. The index should head to make new swing lows in this corrective phase,” Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory,

“Below 100-day simple moving average could drag down the indices towards recent corrective swing low placed around 11461,” he said.

Weak corporate results:

The trend so far has been a mixed bag for India Inc. Infosys reported June quarter numbers which were slightly better than estimates, and most global brokerage firms maintained their rating but raised their 12-month target price.

Apart from Infosys and IndusInd Bank, which reported a 38 percent jump in net profits, there were hardly any other stock which created an impact. Yes Bank, Federal Bank, Mindtree, Wipro, DCB Bank disappointed the Street.

“In the past few days, banks along with IT Services and FMCG companies held the benchmark indices in positive territory while the broader markets remained weak. Rising concerns on US-China trade deal and global economic slowdown post weak earnings in Europe and a sharp decline in exports reported by Japan for the month of June,” Gaurav Dua, Sr VP, Head – Capital Market Strategy & Investments, Sharekhan by BNP Paribas said.

“Domestically also, the disappointing results from YES Bank and MindTree dented sentiments. In the absence of any near term triggers, the negative bias in Indian equities could continue with pronounced weakness in midcap space,” he added.