Next support is at 18,500 on the Sensex and 5,550 on the Nifty
The market opened higher on better-than-expected quarterly data announced by some corporates and optimism from the Asian markets. The banking sector, which was the top loser on Tuesday, witnessed some buying in early trade. However, selling pressure soon led the key indices into negative territory. A marginal rise in the weekly food inflation figures also added to the woes. Volatility was associated with the expiry of the January futures and options (F&O) contract.
The selling became intense in post-noon trade, dragging all the sectoral gauges into the red and closing lower for the second day in a row.
As we expected, the market fell today. The Sensex opened 117 points up at 19,087, gaining the maximum in opening trade over the past 10 days from 13 January 2011. The Nifty opened 38 points up at 5,725. But that was the high point of the day. Bears took over immediately. The market declined below Tuesday's low within an hour, setting the stage for a further fall. The Sensex finally ended 285 points down to close at 18,684 and the Nifty fell 83 points to close at 5,604. Today's fall has broken the past week's low, hitting a new four-month low. Today's decline takes the market in the bear market territory. The next supports are at 5,550 on the Nifty and 18,500 on the Sensex, after which we may witness a pre-budget rally. The advance decline on the NSE was 476:1,232.
The market breadth was tilted in favour of the losers today. The Sensex closed with 28 stocks in the declining list and two stocks in the advancing list while the Nifty had 42 losers and eight gainers. Among the broader markets, the BSE Mid-cap index tumbled 1.88% while the BSE Small-cap index declined 1.35%.
All sectoral gauges closed in the red today. BSE Realty (down 3.57%), BSE Healthcare (down 2.61%), BSE Metal (down 1.98%), BSE Bankex (down 1.85%) and BSE Consumer Durables (down 1.81%) were the top gainers.
Tata Motors (up 2.48%) and TCS (up 0.62%) were the only two gainers in the Sensex list. The top losers were DLF (down 5.42%), Sterlite Industries (down 5.28%), Mahindra & Mahindra (down 4.87%), Reliance Communications (down 3.88%) and Hindustan Unilever (down 3.78%).
Dearer vegetables pushed food inflation marginally up to 15.57% for the week ended 15th January from 15.52% in the previous week, prompting experts to say that the Reserve Bank of India (RBI) may go for yet another round of rate hikes in its mid-quarterly policy review in March. Food inflation was 20.07% a year ago.
Based on price movement in the wholesale market, food inflation rose by 0.05 percentage points for the week ended 15th January, after declining for two consecutive weeks.
Markets in Asia closed mostly higher on signs of economic recovery in some countries in the region. The South Korean market gained on better-than-expected economic growth while the Chinese market was supported by commodity-related stocks.
The Shanghai Composite surged 1.47%, the Jakarta Composite rose 0.37%, the KLSE Composite gained 0.46%, the Nikkei 225 advanced 0.74%, the Seoul Composite rose 0.22% and the Taiwan Weighted ended 0.52% higher in trade. On the other hand, the Hang Seng fell 0.27% and the Straits Times shed 0.03%.
Back home, oil minister S Jaipal Reddy today ruled out deregulation of diesel prices, saying it is not "politically and practically" feasible.
"Let me make it clear, I agree in theory that diesel prices should be deregulated, but whether it is practically and politically feasible is totally different," he added.
Foreign institutional investors were net buyers of stocks worth Rs272.99 crore on Tuesday while domestic institutional investors were net sellers of equities worth Rs169.68 crore.
IT major HCL Technologies (down 0.71%) has entered into a partnership with the PT Multipolar Technology, a subsidiary of Indonesia-based Lippo Group, to offer IT outsourcing in that country. The deal involves IT outsourcing projects in banking, telecom and other sectors this year.
Utility vehicle maker Mahindra & Mahindra fell 4.87% amid reports that Goldman Sachs downgraded the stock to 'sell' from 'buy'. According to media reports, Mahindra & Mahindra sank after its rating was lowered by the Goldman Sachs Group Inc, which cited increased 'cyclical risks' to demand growth.
Steel Authority of India (SAIL) (down 1.59%) is considering setting up a 3 million tonne (MT) steel plant at an investment of Rs15,000 crore at Central Kalimantan province of Indonesia, apart from setting up a mineral processing facility.
The steel major has already signed a memorandum of understanding (MoU) with the Indonesian government for setting up a steel plant and a mineral processing unit besides development of mineral deposits at Central Kalimantan province of the South-east Asian country.
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