Weak Data Points In RBI Reports Push Stocks Into Red Amid Volatility

Volatility has become another name for broader market indices. After opening in the green, NSE’s Nifty moved into the red territory four times before finally settling down lower than Friday’s close. It ended the day with a cut of 54.80 points or 0.49 per cent, closing the day at 11,119.95. BSE’s Sensex lost 141.33 points to close Monday’s trade at 37,531.98, down 0.38 per cent. The advance-decline ratio – shares which went up to those that went down -- was in favour of bears with 1,630 to 890 on Nifty.

The decline in the markets would have been higher, had it not been for some private sector banking stocks which saved the day. The upward movement was largely due to short covering, given the fact that the open interest in a number of these stocks came down in the morning trade. But by the end of the trading session, even Bank Nifty lost sharply from its highs as it managed to end the day in with a gain of mere 35 point or 0.13 percent to close the session at 27,767.

The news which continued to dominate the mood on Dalal Street was the weak data point which emerged from the RBI numbers declared last week. Whether the numbers were on consumption or capacity utilisation, all indicated that the slowdown might take longer to recover than what most estimates said. Another factor which spooked the markets was that some of the leading NBFCs showed their loan growth in consumption space to be slowing down. Since NBFCs are considered to be the last mile connectors in consumer finance, it indicates more than a lack of money as the reason for the disappointing growth numbers.

The news flow from international markets also did not help the Bulls, as most European markets opened for the trade in the red. There was no clarity on the US-China trade talk, either. Part of the sluggishness in market was also because markets would remain closed on Tuesday on account of Dussehra.  Given the volatility with bearish bias, traders with long positions (or Bulls) tend to get jittery, unloading some of their holdings.

Towards the end of the week, technology major Infosys will announce its second quarter results. Since initial results from the technology sector are unlikely to throw up any positive surprises, pressure may come on IT stocks and Bulls on Nifty could be in for some more trouble. 

(Shilpa Nagpal is an analyst at Market Wizards Securities Pvt Ltd.)