Ahead of Market: 10 things that will determine D-Street action on Thursday

Equity benchmark indices Sensex and Nifty fell by 1% on Wednesday on weak global market trends and continuous foreign fund outflows. Fitch Ratings has downgraded the United States government’s credit rating, citing rising debt at the federal, state, and local levels and a “steady deterioration in standards of governance” over the past two decades.

The rating was cut on Tuesday one notch to AA+ from AAA, the highest possible rating.

The Sensex ended below 66,000 levels, tumbling 676 points, while the Nifty fell 200 points to 19,526. Sectorally, all sectors took a hit in the market mayhem, with the PSU Bank sector bearing the brunt. Technically, the Nifty closed below its 20-day Exponential Moving Average (20DEMA), and analysts believe that bullish action may remain delayed as long as the downgap at 19,705 is not filled.

Analysts interpret the market pulse as follows:

“The Indian market saw a widespread sectoral slide, influenced by weak global market trends. Negative news about the US rating downgrade due to fiscal concerns, coupled with weak factory activity data from the Eurozone and China, sparked global concerns. Moreover, prolonged Foreign Institutional Investor (FII) selling, driven by a rise in US bond yields, has dampened the domestic market mood,” said Vinod Nair, Head of Research at Geojit Financial Services.

“The recent drop of the Nifty below its consolidation suggests a bearish sentiment. The index has also fallen below the 21EMA, reinforcing the bearish outlook. The Relative Strength Index (RSI) signals a bearish momentum for the future. Support is seen at 19,500, and a decisive fall below 19,500 may lead to further negativity; while resistance is noted at 19,600,” stated Rupak De from LKP Securities.

Regarding Thursday’s market action, here are some key indicators:

US market
Wall Street fell on Wednesday after rating agency Fitch’s move to downgrade the U.S. government’s credit rating hit appetite for risky assets around the world.

Fitch downgraded the United States to AA+ from AAA, citing fiscal deterioration over the next three years as well as a growing general government debt burden, making it the second major rating agency after Standard & Poor’s move in 2011 to strip the country of its triple-A rating.

The yield on U.S. 10-year Treasury notes rose to 4.07%, after briefly slipping earlier in the day. Safe havens gold and the Japanese yen rose, while the dollar index climbed 0.5%.

At 9:39 a.m. ET, the Dow Jones Industrial Average was down 124.43 points, or 0.35%, at 35,506.25, the S&P 500 was down 35.45 points, or 0.77%, at 4,541.28, and the Nasdaq Composite was down 185.63 points, or 1.30%, at 14,098.28.

European shares
European shares tumbled to near two-week lows on Wednesday, with technology and auto stocks leading losses, as investors across the globe fled riskier assets after a surprise downgrade on U.S. credit rating by Fitch.

The pan-European STOXX 600 index fell 1.1% by 0708 GMT, touching its lowest level since July 20.

U.S. futures slid more than half a percent and bond prices rose after rating agency Fitch on Tuesday downgraded U.S. debt rating, citing fiscal deterioration over the next three years and repeated down-the-wire debt ceiling negotiations that threaten the government’s ability to pay its bills.

The STOXX 600 fell about 1% on Tuesday, its worst day in nearly a month, after weak factory activity data worldwide raised concerns of an economic slowdown.

Tech View: Long negative candle
A long negative candle was formed on the daily chart with minor lower shadow. Technically, this pattern indicates sharp negative reversal in the market. Nifty is currently placed at the edge of moving below the immediate support of up trend line at 19500 levels as per the concept of change in polarity.

Stocks showing bullish bias
Momentum indicator Moving Average Convergence Divergence (MACD) showed bullish trade on the counters of RattanIndia Infra, GE Power, Star Cement, Man Industries and Laurus Labs among others.

The MACD is known for signaling trend reversals in traded securities or indices. When the MACD crosses above the signal line, it gives a bullish signal, indicating that the price of the security may see an upward movement and vice versa.

Stocks signaling weakness ahead
The MACD showed bearish signs on the counters of Bank of Maharashtra, BEL, Union Bank, SBI and Canara Bank among others. Bearish crossover on the MACD on these counters indicated that they have just begun their downward journey.

Most active stocks in value terms
HDFC Bank (Rs 2312 crore), RIL (Rs 1584 crore), ICICI Bank (Rs 1555 crore), Infosys (Rs 1007 crore) and Chola Investment Finance(Rs 995 crore) were among the most active stocks on NSE in value terms. Higher activity on a counter in value terms can help identify the counters with highest trading turnovers in the day.

Most active stocks in volume terms
Reliance Power (Shares traded: 39.69 crore), Suzlon Energy (Shares traded: 22.97 crore), IRFC (Shares traded: 15.96 crore), Vodafone Idea (Shares traded: 12.3 crore), and YES Bank (Shares traded: 10.89 crore) and were among the most traded stocks in the session on NSE.

Stocks showing buying interest
Shares of Star Cement, BEML, Finolex Industries, Mishra Dhatu Nigam and Escorts among others witnessed strong buying interest from market participants as they scaled their fresh 52-week highs, signaling bullish sentiment.

Stocks seeing selling pressure
Shares of Campus Activewear, Sintex Plastics, Viji Finance and SREI Infra among others stocks hit their 52-week lows, signaling bearish sentiment on the counters.

Sentiment meter favours bears
Overall, market breadth favoured bears as 2,428 stocks ended in the red, while 1,176 names settled in the green.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)

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