Volume IconIs the recent selling in markets overdone?

The US Fed delivered third large rate hike last week with over half of Nifty500 stocks slipping below their key moving averages. Is this fall set to continue or is the recent selling an overreaction?

US Federal Reserve

Photo: Bloomberg

Since the US Federal Reserve hiked rates by 75 basis points last Wednesday, the 
Sensex and the Nifty50 indices have tumbled nearly 2% each, turning negative in terms of returns for 2022.

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As per technical charts, over half of the Nifty500 index constituents have been dragged below their respective 200-day moving averages with the recent selloff. 

Technically, the 200- DMA provides a broad outlook of the underlying trend in a stock or an index for long-term investors. Traders prefer stocks and indices that are above the 200-DMA, since they tend to perform better over time. 
 
Analysts, however, say this correction has been overblown due to panic selling by investors.

G Chokkalingam, Founder and CIO, Equinomics Research believes selling in domestic markets is overdone. Indian markets have been penalised for problems of the West, he says. India's GDP growth still has been resilient. Fall in oil prices, good monsoon, healthy Kharif crop to keep sentiment positive. 

Sharing similar views, VK Vijayakumar of Geojit Financial Services says, despite an unfavourable global macro construct in the short-run, the Indian markets will outperform their global peers.  Vijayakumar says, “With the Fed staying ultra-hawkish, the 5% slide in the MSCI world index last week reflects the bearish undertone of global equities. However, India will outperform both in economic growth and market performance”. 
“Selective buying can be done in domestic economy-facing segments like financials, auto, capital goods, and others,” Vijayakumar says. 

That said, the Sensex and Nifty indices slid below their 50-day moving averages on Monday. And the duo can continue the slide on breaching the key support levels of 200-day moving averages, as per technical charts. 

Avdhut Bagkar of Business Standard reports, 268 stocks trade below 200-DMA; 37 added on Monday. Sensex stocks: Tata Steel, Power Grid, TCS, Wipro below 200-DMA. Nifty support at 16,700-16-800; Sensex support at 56,000 levels.

Today, global market trends, FII inflows, rupee-dollar levels and oil prices will dictate the market trajectory. 

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First Published: Sep 27 2022 | 7:00 AM IST

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