The Sensex and Nifty are down nearly 4% on the back of rising global nervousness due to rising inflation, which has raised fears that aggressive rate hikes by central banks could hurt global growth. Last week’s data showed that retail inflation in India rose to an eight-year high of 7.79% in April on an annual basis due to higher food prices.
Experts said that markets are in an oversold zone in technical parameters, but overall sentiment remains stable and could sell out with every increase. “Global sentiment continues to be negative and earnings season has not been a big positive surprise. Management comments suggest that inflation in the June quarter will hurt companies even more,” said Harsh Upadhyay, chief investment officer-equity at AMC. “Investors are now realizing that interest rates are rising significantly, so sentiment remains weak. Most global indications and sentiment are negative,” Upadhyay said.
For the sixth day in a row, the Sensex closed at 52,793.62 on Friday, down 136.69 points or 0.26% from the previous close. The Nifty ended 25.85 points or 0.16% lower at 15,782.15. The Sensex and Nifty performed less than their counterparts in most Asian markets, and all sector indices ended in red for the weak. The Sensex and Nifty fell more than 15% from record highs in October last year, and the indicators could fall on the bear market – as defined by a 20% drop from the peak – if the market increases losses.
The Nifty’s one-year forward price-to-earnings ratio has fallen sharply from 18.2 times to 17.5 times in the last seven days, the CLSA said. It still has a 10.5% premium to its 16-year average but is now well below a standard deviation from its historical average level, the CLSA said.
Technical analysts say the weakness will persist as long as the Nifty stays below 16,000. “The main trend is that the market is under pressure but some mechanical indicators are showing signs of over-selling. So in higher areas some bounce may be seen before the resumption of selling pressure,” said Chandan.