A laboured rally up to 5,650 on the Nifty is possible, if Wednesday’s lows hold

The Sensex and Nifty today opened with small positive gains, at 18,558 and 5,568. The indices quickly slipped into the red to hit intra-day lows of 18,340 and 5,503, respectively. Rate-sensitive sectors like banking, realty and auto, which were impacted by the harsh policy announcements of the Reserve Bank of India (RBI) on Tuesday, continued to pull the market lower in early trade today.
 

However, in the post-noon period, the indices inched to intra-day highs at 18,604 and 5,579. But the gains were short-lived and the market slipped into the red in the last hour. The Sensex declined 65 points to close at 18,469 and the Nifty fell 28 points to close at 5,537. The advance-decline ratio on the National Stock Exchange was 543:1136.
 

On 24 March 2011, the Nifty had closed at 5,522, from where it took nine trading days to hit an intra-day high of 5,944 on 6 April 2011 and closed at 5,892. The total gains of 369 points of the nine trading sessions have been wiped off to the extent of a 355 point drop in the subsequent 17 trading sessions (including today’s fall of 28 points on the Nifty).
 

If the lows of today hold, the market can rally up to 5,650 on short-covering, before the decline resumes. The chances of a rally tomorrow are bright, given historical evidence. Since 1990, the market has been negative for eight consecutive days on 16 occasions (excluding the current fall). Out these 16 times, it has turned turned positive on the ninth trading day on 11 occasions, while on the other five it remained negative.

In the broader market today, the BSE Mid-cap index declined 0.45% and the BSE Small-cap index fell by 0.54%.
 

BSE Auto (down 1.33%), BSE TECk (down 1.13%), BSE IT (down 1.08%), BSE Metal (down 1.05%) and BSE Healthcare (down 0.92%) were the top sectoral losers. On the other hand, BSE Oil & Gas (up 1.21%), BSE PSU (up 0.71%) and BSE Consumer Durables (up 0.52%) ended in the green.

Among the Sensex stocks, ONGC (up 4.78%), HDFC Bank (up 1.35%), State Bank of India (up 1.33%), Hindustan Unilever (up 1.03%) and Jaiprakash Associates (up 0.88%) settled at the top. On the other hand, Bajaj Auto (down 4.82%), Hero Honda (down 3.63%), HDFC (down 2.89%), Reliance Communications (down 2.63%) and Tata Power (down 2.24%) were the major losers.

The government is considering hiking diesel prices by up to Rs3 a litre, after the assembly elections in five states are completed next week, and an equally steep rise in petrol prices is also on the cards.

A Rs3-Rs4/litre hike in the price of petrol, which was freed from government control last June, could happen simultaneously after polling in the last phase of assembly elections is completed on 10th May, according to a top government official.

An increase in domestic LPG prices may also be discussed at the EGoM meeting that will decide on how the oil firms will be compensated for their losses, he said.

Markets in Asia settled mostly in the red, as falling commodity prices dragged energy and materials-related stocks lower. Speculations of another rate hike by the Chinese central bank weighed on investor sentiments there. Besides, the European Central Bank will also look at increasing borrowing costs at the end of its policy meeting on Thursday.

The Shanghai Composite tumbled 2.23%, the Hang Seng tanked 1.31%, the KLSE Composite fell by 0.20%, the Straits Times lost 1.26% and the Seoul Composite declined 0.91%. On the other hand, the Jakarta Composite gained 0.03% and the Taiwan Weighted added 0.01%. The Japanese market remained closed for the Golden Week holidays.

Back home, foreign institutional investors were net sellers of stocks worth Rs1,178.66 crore on Tuesday. On the other hand, domestic institutional investors were net buyers of stocks worth Rs606.83 crore.