Sensex sinks over 1,000 pts from day's high, Nifty below 22,500. What's ahead for D-Street?

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ETMarkets.com

Sensex fell over 450 points to drop below 72,800, down more than 1,000 points from the day’s high, while the Nifty 50 shed over 200 points to slip below 22,500 as of around 10.40 am.

Broader markets plunged deeper into the red, with the Nifty Smallcap 100 and Nifty Midcap 100 indices falling up to 3%. The Sensex, which opened in the green on gains in IT stocks amid a global selloff in AI-linked stocks, erased its morning gains of around 500 points before sliding sharply into the red.

Among the sectors, Nifty Metal and Nifty Consumer Durables plunged around 3% while Nifty Auto, Nifty PSU Bank, Nifty Realty and several others dropped around 2% each. Nifty IT however jumped 1%. The overall market breadth remained sharply negative, with NSE seeing 407 advances against 2,778 declines, while 102 stocks remained unchanged.

What lies ahead for Dalal Street?

Brent crude spiking to $114 is a major negative for the economy and markets, said V K Vijayakumar, Chief Investment Strategist, Geojit Investments. However, there are strong positives that can counter this negative, he said.

“The sharp decline in the US 10-year yield to 4.96 % and the appreciation in the rupee to 94.70 to the dollar are positives that can restrain FII selling significantly. More importantly, more than Rs 3 lakh of the IPO money will come back into the system after the allotment is completed by next Monday. This potential liquidity surge can lift the market next week. The market can move higher anticipating this in advance,” the analyst said.

It is important to understand that the rally, if it happens, will be led by the large-caps which are signalling resilience, Vijayakumar said. The sharp correction in the broader market, particularly in small-caps, might continue since their valuations, driven up by liquidity rather than fundamentals, are hard to justify. Fairly-valued large-caps, particularly those which are growing well, present value buying opportunities for patient investors, according to the analyst.

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Technical view on Nifty

For Nifty today, holding the gap-up and sustaining 22,800 resistance may ignite a short-covering rally to 23,000, said Hemang Gor, Senior Research Analyst- Derivatives and Technical Research, Axis Direct.

He sees the benchmark index finding critical support at 22,500.

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