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Sensex Plunges 750 pts, Investors lose Rs 2.5 Lakh Crore; Why is Market Falling Today?

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Indian indices witnessed a negative start on Tuesday amid the increasing intensity of headwinds including rising crude oil prices and a selloff in global markets. Closer to home, investors also seemed to be cautious amid the ongoing RBI MPC meet. BSE Sensex declined 752.43 points or 1.35 per cent to close at 54,925.89. Its broader peer NSE Nifty tanked 205.95 points or 1.24 per cent to 16,363.60. Investors were left poorer by Rs 2.56 lakh crore as the market cap of BSE listed companies, which reflects their wealth, slid to Rs 253.84 lakh crore.

Why is The Stock Market Falling Today?

RBI MPC Outcome Awaited

Experts said that Indian stock markets have seen volatile moves in the past week as worries build over stubbornly high inflation, with the Reserve Bank of India expected to follow up its unscheduled rate hike in May with another move at the policy meeting on Wednesday.  Analysts though said RBI’s rate hike is a foregone conclusion — the only unknown is the quantum of the rate hike. Commentary on inflation will be key to watch.

“Even if the rate hike is by a steep 50 bps, the market is unlikely to be impacted much since frontloading of the rate hike will be more effective in anchoring inflation expectations,” said VK Vijayakumar, chief investment strategist at Geojit Financial Services.

Oil Prices Boil

Oil prices inched higher on Tuesday on expected demand recovery in China as it relaxed tough COVID curbs and doubts a higher output target by OPEC+ producers would ease tight supply. Brent crude futures were up 19 cents, or 0.2 per cent, at $119.70 barrel at 0050 GMT.

Ravindra Rao, Kotak Securities said: “NYMEX crude trades higher near $119/bbl but well off the 3-month high set yesterday. Crude remains supported by China’s lifting of virus-related restrictions, Saudi’s move to raise price for Asian buyers and EU’s ban on Russian crude. Crude is however struggling amid increased volatility in equity markets amid monetary tightening concerns. Market players are also trying to assess if Russian supply loss can be compensated by higher exports from countries like Venezuela and Iran who are under economic sanctions. Crude may remain volatile however tightness concerns may keep prices supported.”

Global Cues

Asian stock markets were mixed Tuesday after a bond sell-off on Wall Street fueled anxiety about a possible US economic slowdown and Australia raised interest rates. Shanghai and Tokyo advanced while Hong Kong and Seoul declined. The yen, trading at two-decade lows, fell further to below 132 to the dollar.

Wall Street’s benchmark S&P 500 index rose 0.3 per cent on Monday and the market price of a 10-year Treasury bond fell. That increased its yield, or the difference between the day’s price and the payout at maturity.

Nifty Technical Outlook

Sameet Chavan, Angel One Ltd, said: “Our markets started the week on a sluggish note as indicated by the SGX Nifty. As the day progressed, the global cues improved a lot but our markets failed to move in tandem. In the initial hour, Nifty revisited Thursday’s low around 16,450 and then throughout the remaining part of the day, remained in a slender range with a modest recovery in the latter half. Eventually, the Nifty ended the session with a negligible loss a tad above the 16,550 mark.”

“It was clearly a lackluster day of trade for our domestic markets. Mostly when key indices consolidate, the action is seen among individual pockets; but this wasn’t the case yesterday. Stock specific also, there wasn’t much action seen in the market. Only a few handfuls of stocks kept showing some interest and most of the others were just following the footprints of key indices. As a result, there is no change seen in chart structure and therefore, the levels remain as it is. On the higher side, 16,700 – 16,800 should be seen as immediate hurdles; whereas on the flip side, 16,450 followed by 16,400 are to be considered sacrosanct supports. Traders are advised to remain light on positions and should look to buy as close as possible to supports and vice versa,” he added.

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