Markets may see some more downside

It was an absolute bloodbath for the market today. The Nifty crashed 137.20 points or 2.32% to settle at 5,766.50, after hitting an intraday low of 5,742.30. The 30-share BSE Sensex closed at 19,242.36, down 454.12 points or 2.31% from previous closing value.

Fear ruled in the broader market too; rumours about probes into price fixing led to widespread panic; margin calls were triggered leading the small cap index down 6% and the midcap index down 4%.

Rahul Mohindar, viratechindia.com said, the speed of fall was surprising. “In terms of a negative trend, I have been pretty much talking about expecting it. I have been mentioning 5,940 is a very key level that broke down over the last two-three days. Technically, from a point of figures we are looking at something like 5,600 at least coming in from here. So, I think the sell off will extend itself, I think the sell off will extend further in sectors like sugar and banking.”

Mohindar further said, “Amongst the frontline heavyweights, we have seen a major breakdown in RIL which points to a target of about Rs 940-945. So, I think there are some of these heavyweight stocks which will pull the index a little more.”

Commenting on the sharp cut, Amisha Vora, Prabhudas Lilladher said, “I think this is a very disturbing cut. Against the fact that European markets are also stable, it probably shows that somewhere a lot of fear is emerging. If you see technically also, markets have breached some of the important points, supports and so has some of the stocks. So, probably this is a pretty disturbing trend that is emerging.”

Ambreesh Baliga, Karvy Stock Broking said, “I think again we are at that tipping point, we should not break this 5,700-5,800 levels because in case we break this band and go below 5,700, I suppose you will see this fall becoming steeper. That is where it starts hurting a lot of large players and that is where you will see the hot money moving out. So, we just have to keep our fingers crossed, just hoping that it doesn’t break that.”

KR Bharat, Advent Advisors was also of the view that the cut could be deeper. “The only reason I say so is because in a market like this, which is either fiercely trending up or down, there is no shortage of rumour.  Now, whether or not those rumours are true, one has not idea, but what happens is people start panicking. The level of selling increases, so you have margin calls, you have people that are taken out, and you have again rumours of brokers going bust and the vicious cycle continues," he explained.

Bharat further said, "This level of blood letting will probably stop only when you get some information to the effect that investigations are over and these are the list of brokers and these are the list of stocks that are being looked into. Until that happens, you are going to have either fact or fiction, either rumour or fact. You will keep getting negative flows that will come in regarding stock brokers and promoters, which will ensure that this doesn’t stop fairly soon. Even when it doesn’t stop, don’t expect a rebound immediately.

Dhiraj Agarwal, Standard Chartered Capital Markets said, "This is a sheer panic at this point in time because of the headlines, which have been continuously coming in, with respect to all investigations and all the wrong doing by various promoters, from brokers and it’s a self-fulfilling proposition because it feeds on itself. Once the cat is out of the bag, you don’t know how to put it back. So, at this point of time the market is not only differentiating being good and the bad, where there is a problem, where there is not a problem, the buyers have disappeared. So, while we are not seeing too much of selling, but simply the buyers have disappeared and probably margin calls are there in the retail, HNI space making things very panicky."