Stock Watch: Downtrend continues
Stock Watch: Indian Stock Indices continue weekly downtrend
Weekly Insights – Technical
17 March – 24 March
Indian Stock Market Indices status as of day closing March 24, 2023
Sensex: 57,527 (-309.18) – 0.69%
Nifty 50: 16,945 (-131.85) -0.77%
Nifty Bank: 39,395 (-221.55) -0.56%
The downtrend in Indian Stock Indices continued this week as anticipated on weak global market indications due to ongoing turbulence in banks, its crisis in the USA and its contagion effect spreading to some European banks.
On the weekly chart, the Sensex has fallen about 500 points and if one sees from the high of this year 2023, it has fallen from 61,618 levels to 57,542 as of last Friday’s (March 24, 2023) closing i.e. almost losing 4,070 points. Nifty 50 has already fallen 10% from its year high of 18,262 to 16,945 as of last Friday’s closing, a loss of 1,317 points. Technically, 16,800 is a very strong support level for Nifty and the breaking of which can be anticipated if there is a further sell-off in Banking and FMCG (Fast Moving Consumer Goods) sector stocks.
On March 22, 2023, the global market initially reacted positively to the US FED’s statement of increasing the repo rate as expected by 0.25 basis points, still keeping its unwavering stand on fixing inflation issues over economic growth issues. The market is expecting a further 0.25 basis points increase in June 2023, before taking a stance on the pause of the rate increases. Although the US FED is aware of how it’s going to continue the negative impact on banks and the already weaker macro-economy, there seems to be no way in the short term to overcome the vicious circle of Inflation and its effect on the looming recession risk due to the aggressive stance of increasing the rates. Soon after Chair of the Federal Reserve of the United States Jerome Powell’s speech on the rate increase, the US Treasury Secretary, Janet Yellen announced that there is no consideration for “Blanket Insurance” on bank deposits, which dampened the market sentiment immediately failing to recoup, thus fuelling decline in the stock market.
Following the downtrend, USA’s community banks and also some other banks continue to be at risk, expecting their depositors to rush for withdrawals and shift their money into larger banks or safer investments in Gold commodity which is seeing a price hike due to considerable buying of the asset class. Even Crypto apart from Gold and Silver is looking attractive to investors because of the present downtrend in stock markets.
Nifty50 chart on Daily Time frame as on March 24, 2023 (closing)
Next Week Market/Trading Session Outlook
The banking concerns will remain the main volatile factor globally in the times to come as there is little or no good news expected from the beaten-down sector. It is going to affect next week and further trading sessions in major markets around the world. However, there can be some spike or spur of upside momentum in banking stocks due to some comforting statements by the affected banks or there could be relief providing statements from the US Government which could provide some sort of comfort to the community bank depositors. As per the latest development, there is some improvement in sentiments for US assets on further reassurance on US banks but for European Banks; Deutsche bank fell by 8.5% and the European Bank index fell by 4.6%.
In the Indian Market context, there have been two important developments last Friday which could further have an impact on the market sessions next week.
In the New Finance Bill (effective F.Y 2023-24), which was passed in the Lok Sabha on March 24, 2023, the Indian Finance Minister, Nirmala Sitharaman, has done away with the long-term tax benefit (LTCG – Long term Capital Gain) in Debt Mutual Funds. It will be now treated under short-term gains which substantially diminish the attractiveness of such schemes. This implies that the income from Debt Mutual Funds will come under the Income Tax Slab without any tax benefits. Fixed deposits in banks make more sense when the banks are giving high-interest rates.
Securities and Transactions Tax (STT) has been increased by 25% on the sale of Options and the sale of F&O (future and options). In percentage terms in F&O from 0.015 to 0.25%, and in Options 0.05% to now 0.062%.
The market is yet to react to these two developments in the upcoming week. Essentially, from a broader perspective, the Indian stock market will continue to be volatile, seeing both up-swings and down-swings on a daily time frame. Selling on the rise will be the trend so expecting any major swing on the upside is very limited and the traders should maintain a light position in the shorter time frame.
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*The writer is a long-term investor/trader. The views expressed are personal.