The Sensex and Nifty fell nearly 4% on the back of rising nervousness globally due to the surge in inflation which has triggered fear that aggressive rate hikes by central banks would hurt global growth. Last week’s data showed retail inflation in India spiked to an eight-year high of 7.79% in April on an annual basis due to high food prices.
Experts said markets are in an oversold zone on technical parameters, but the overall sentiment remains bearish and there could be selling on every rise. “Global sentiments are still continuing to be negative and the earnings season has not thrown up major positive surprises. Management commentaries are suggesting cost inflation will hurt companies even more in the June quarter,” said Harsha Upadhyaya, chief investment officer-equity at AMC. “Now investors are realising interest rates are going to rise meaningfully, so sentiment remains weak. Most global cues and sentiments are negative,” said Upadhyaya.
Ending down for the sixth day in a row, the Sensex closed at 52,793.62 on Friday, down 136.69 points, or 0.26%, from the previous close. The Nifty ended down 25.85 points, or 0.16%, at 15,782.15. The Sensex and Nifty underperformed most Asian market peers, and all sector indices ended in the red for the weak. The Sensex and Nifty are down over 15% from record highs hit in October last year, and indices could fall into a bear market – which is defined by a 20% drop from the peaks – if the market extends losses.
Nifty’s one-year forward price to earnings ratio fell sharply from 18.2 times to 17.5 times in the past seven days, said CLSA. It is still at a 10.5% premium to its 16-year average but has now fallen well below the one standard deviation to its historical average levels, said CLSA.
Technical analysts said weakness will persist as long as the Nifty is below 16,000. “The major trend shows the market is in pressure but some mechanical indicators are showing signs of being oversold. So some bounce could be seen before it again witnesses emergence of selling pressure at higher zones,” said Chandan
, derivatives analyst at .
