Market falls the most since Budget day

The fall was led by rate-sensitive banking stocks, which fell an average two per cent ahead of WPI data

After a spectacular upmove last week, bulls seem to be losing their grip once again with the market falling on three occasions this week. On Wednesday, the benchmark indices posted their biggest fall in two weeks on the back of weak global cues.

The fall was led by rate-sensitive banking stocks, which fell an average two per cent ahead of the wholesale price inflation (WPI) data on Thursday. The WPI inflation data will be keenly watched by the market as it will be a harbinger of the outcome of the Reserve Bank of India (RBI) policy meeting on March 19.

The benchmark 30-share index, Sensex, ended at 19,362.55, down 202.37 points, or 1.03 per cent, the most since Budget day on February 28. Meanwhile, the 50-share Nifty closed below its 20- and 100-day moving average (DMA) at 5,851.20, down 62.9 points, or 1.06 per cent. (BULLS LOSING GRIP)

“With the industrial output and the consumer inflation data out of the way, market participants will look forward to the monthly inflation data,” said Amar Ambani, head of research at IIFL. “Technically, Nifty extended its weakness and closed below its 100-DMA (5,857), confirming a breakdown in the index after last week’s recovery. The undertone remains cautious and there is no point to taking any risky bets ahead of the RBI policy meet next week.”

Most Asian and European markets too declined, with the Chinese market falling to its two-month low levels, on the back of profit-taking following last week’s rapid gains.

“The short-term liquidity in the market is driven by the euro-dollar equation. The macro data from the US was positive but weak out of China and Europe. This suggest, the euro can decline below 1.3 against the dollar. If that happens, the riskier assets, including Indian market, could fall further,” said Siddharth Bhamre, head-derivatives at Angel Broking.

Experts said the next big trigger for the market would be the RBI policy meet. Most investors are expecting a 25 basis points rate cut but recent stronger-than-expected industrial output data and accelerating consumer inflation could force the central bank to act otherwise.  Market players said that if the central bank doesn’t lower interest rates the market could react negatively.

Among the sectoral indices, BSE Banking index fell the most at 2.18 per cent led by ICICI Bank, which fell three per cent, after some nervous investors reduced their exposures to banking stocks following a spectacular rise last week.

Hindalco, Bajaj Auto and Maruti Suzuki were some other index stocks, which fell more than three per cent each.

According to provisional data, foreign institutional investors net bought shares worth Rs 304 crore, while domestic institutional investors net sold shares worth Rs 434 crore On Wednesday.