Short rally in the Nifty possible after a few days up to 5,400

Panic selling resulted in the Nifty suffering a major loss of 2.26%, its biggest one-day decline since 4 May 2011. The sell-off happened on huge volumes of 80.37 crore shares, which was way above its 10-day moving average and the index closed at its lowest level in nearly 14 months.

The market is likely to remain down for a few days before a short rally starts. For the uptrend to continue, it is essential that the market closes above the 5,400 level.

The domestic markets opened sharply lower as worries about a serious global economic slowdown sparked a slide in the markets globally. Investors worried about foreign investors pulling out funds from emerging markets and the impact on domestic companies due to the slowdown, particularly in the US and Europe.

The Nifty opened at 5,204, down 128 points, and the Sensex tanked 343 points to resume trade at 17,350. The IT, realty and power sectors led the decline.

After the weak opening the market was range-bound, even as the benchmarks registered high points within the hour. The intra-day high for the Nifty was 5,230 and for the Sensex 17,358. The sell-off worsened around noon and at the lowest point the benchmarks were down by over 3.5%.

The Nifty made an intra-day low at 5,116 and the Sensex at 16,991. A pull-back was noticed as European markets opened with limited losses and the indices recovered more than 1% from the day’s lows to close with a big loss on the day. The Nifty ended at 5,215, down by 117 points, and the Sensex finished at 17,305, a huge loss of 387 points from its previous close.

The advance-decline ratio on the National Stock Exchange (NSE) was 243:1566.

The broader indices were mauled in the market mayhem. The BSE Mid-cap index sank 2.16% and the BSE Small-cap index tumbled 3.08%.

All sectoral indices closed lower with the BSE IT index (down 3.93%) and BSE TECk (down 3.38%) the worst affected. BSE Realty (down 3.13%), BSE Power (down 3.09%) and BSE Consumer Durables (down 2.77%) all lost heavily.

ONGC (up 1.08%), Hindalco Industries (up 0.77%) and Cipla (up 0.73%) were the only gainers on the Sensex. Reliance Infrastructure (down 7.43%) and Reliance Communications (down 7.16%), which will go off the Sensex from Monday, were the top losers. These were followed by Sterlite Industries (down 6.22%), Tata Steel (down 4.48%) and Infosys (down 4.35%).

The top performers on the Nifty were BPCL (up 1.87%), Hindalco Industries (up 1.52%), ONGC (up 1.48%), IDFC (up 0.53%) and Jindal Steel (up 0.27%). The draggers were Reliance Infra (down 7.35%), Cairn India (down 7.18%), RCom (down 6.66%), Sterlite Industries (down 5.79%) and Sesa Goa (down 5.75%).

Markets in Asia tumbled between 1.45% and 5.58% as analysts warned that the US economy may slip back into recession if steps were not taken to strengthen growth and euro zone debt concerns spread to Italy and Spain.

The Shanghai Composite declined 2.15%, the Hang Seng tanked 4.29%, the Jakarta Composite tumbled 4.86%, the KLSE Composite fell 1.45%, the Nikkei 225 slipped 3.72%, the Straits Times retreated 3.61%, the Seoul Composite lost 3.70% and the Taiwan Weighted plunged 5.58%.

On Thursday, foreign institutional investors were net sellers of shares worth Rs254.55 crore, whereas domestic institutional investors were net buyers of stocks worth Rs316.50 crore.

State-run power utility major NTPC is likely to invest about Rs1 lakh crore in setting up a 9,500MW hydel power project in Arunachal Pradesh. The company is in talks with the Arunachal Pradesh government about the project. It also plans to commission a 800MW Koldam project in Himachal Pradesh, next year. The stock declined 3.45% to end at Rs170.95 on the NSE.

Tata Consultancy Services, the country’s largest IT software firm, has earmarked a capital expenditure of Rs2,300 crore for the financial year 2011-12. The company will consider investments or acquisition opportunities in some of the market areas, as and when they arise. The stock declined 3.37% to Rs1,058.90 on the NSE.

GMR Infrastructure is considering a bid to operate airports at Barcelona and Madrid, after the Spanish government authorised a stake sale in the two aerodromes. The company is also looking at bidding for airport projects in Puerto Rico and South Korea, where it has initiated discussions with the respective governments for setting up new airports in these countries. The stock fell 1.16% to close at Rs29.95 on the NSE.