Underlying trend remains negative

Devaluing of Chinese currency yuan and announcement in Parliament of abolition of Article 370 of the Constitution granting special status to the State of Jammu & Kashmir led to heavy selling in the equities market by the foreign portfolio investors.

Sensex and Nifty fell over 1 per cent though there was some recovery towards the close of the trade. The Sensex fell 701.43 points to a low of 36416.70 in early morning trade but recovered soon to close finally down 418.38 points or 1.13 per cent at 36699.84. The Nifty-50 dipped to a low of 10782.60 but closed 134.75 or 1.23 per cent down at 10862.60.

The broader market too fell with BSE Mid-Cap Index down 1.26 per cent and BSE Small-Cap Index down 1.69 per cent.

Select sectoral indices lost more, led by BSE Bankex (-2.06 per cent), Power (-2.56 per cent), Consumer Durables (2.16 per cent), Metal (-1.92 per cent), Oil & Gas (1.92 per cent), Capital Goods (-1.68 per cent) and Auto (-1.26 per cent).

Foreign portfolio investors were net sellers by Rs 2,016.73 crore as per provisional data while the domestic institutions were net buyers by Rs 1,871.27 crore.

Technical View
Rohit Singre, Senior Technical Analyst, LKP Securities said, "Index opened gap down on weak global cues and closed a day at 10863 with loss of 135 points. Now Index has next support near 10800-10,750 zone and resistance is coming near 10900-11000 zone. To show strength Index need to sustain above 11000 mark else every rise will be uses for profit booking or making fresh shorts. Nifty bank has showed sharp cut of 2 per cent on Monday and closed the day at 27648. Nifty bank has support near 27400-27200 zone and resistance is coming near 27900-28200 zone".

Nagaraj Shetti, Technical Research Analyst, HDFC securities said, "The underlying trend remains negative. We have been observing a pattern of consistent sell on intraday rise in the last few sessions. Hence, any sustainable upside bounce in the coming session is expected to halt this prolong down trend in the market."

Market View
Ajit Mishra, VP- Research, Religare Broking said, "The Indian markets started the week on a negative note led by on-going tensions in Kashmir and unsupportive global cues. We expect volatility to remain high in the near term and maintain our cautious stance on Indian markets. Given the comforting inflation data and declining growth, expectations are rife for a fourth consecutive rate cut of 25bps by RBI in its policy meet on August 07, 2019. However, the commentary on growth and inflation would be more important factor in deciding the course of the markets."

"On-going turmoil in Kashmir may induce volatility in the markets. On the global front, escalating trade tensions between US and China will keep market participants on edge and cause volatility in oil prices as well as currency," Mishra said.