Stock market crash: After trading in a range of 23,000 to 24,000 for more than a month, the Nifty 50 index finally broke down and slipped below 23,000 decisively. Soaring US bond yields, elevated crude oil prices, and buzz about a weak monsoon yield are among the major drags that pulled down the Nifty 50 and other key benchmark indices below their crucial support levels.
According to stock market experts, rising US bond yields, especially the US 10-year bond yield, is the major drag for the Indian stock market. However, the sustained elevation of crude oil prices has renewed inflation fears, which may dent industrial margins and quarterly earnings. They said the US 10-year bond yield has crossed 5%, and any further escalation is expected to put extra pressure on the Nifty 50 and other indices. In fact, inflation is expected to remain a major concern, as higher crude oil prices and weak monsoon output are likely to put extra pressure on the government’s exchequer.
Nifty 50 prediction | What technical chart suggests
Speaking on the outlook for the Nifty 50 today, Sumeet Bagadia, Executive Director at Choice Broking, said, “The breakdown below 23,000 and the lower-high neckline, coupled with rising volumes, has further weakened the short-term structure. The 22,700–22,600 zone is the immediate support area, while 22,900–23,100 is likely to act as the first recovery hurdle.”
Expecting the weakness to continue further, Sumeet Bagadia said, “PSU Banks, Realty, MidSmall Financials and Banks were among the biggest sectoral laggards, while higher Call OI around 23,000–22,900 indicates overhead supply. With PCR at 0.62 and India VIX rising 12.15% to 13.6375, the near-term setup remains bearish, with volatility likely to stay elevated.”
Asked about how much downside in the Nifty 50 index we can expect, Vaishali Parekh, Vice President — Technical Research at Prabhudas Lilladher, said, “The Nifty 50 index has formed a huge bearish candle on the daily chart. With the overall trend turning weak, one can expect a further slide in the coming sessions. With the bias and sentiment turned into a nervous scenario, the downside targets of 22500 and 22000 levels are wide open as of now.”
Can Nifty 50 break below 22K?
Speaking on the major support levels for the Nifty 50 today, Amit Goel, Chief Global Strategist at PACE 360, said, “The immediate support for the Nifty 50 today is 22,500 to 22,300 range. On breaking below this support on a closing basis, it may open the probability for the next support placed at 21,000.”
Top 3 drags for the Nifty 50 index
Speaking on the major drags, which may pull down the Nifty 50 index towards 21,000 levels, Amit Goel of PACE 360 said, “Rising US Treasury yields are the major reason for the Indian stock market’s poor show. However, crude oil prices are sustaining at higher levels, renewing inflation fears and are expected to act as a taper for the upcoming earnings season. The recent weak monsoon output is another jitter that has hit the bull sentiment.”
Rising US bond yields
Pointing towards the US bond yields, Avinash Gorakshkar, Founder of Avinash Mentor Research, said, “The US bond yields are skyrocketing, especially the US 10-year bond yield. It has crossed 5%, and there is no possibility of any pause in this rally. So, the equity and other assets are losing money to the global treasuries, because a high-interest-rate regime has led to a rise in the treasury yields of other countries like Japan, France, the UK, Germany, South Korea, etc.”
Gorakshkar said that investors are favouring bonds over other assets, which include equities.
Renewed fear of inflation
“Due to the crude oil prices sustaining at elevated levels, inflation is expected to put pressure on the industrial margins, a scenario, which is negative for the upcoming quarterly earnings season. A weak earnings season will be highly negative for the Indian equities, as it would dent the chances of trend reversal,” said Sandeep Pandey, Co-founder of Basav Capital.
Weak monsoon season
Highlighting the weak monsoon season and its impact on Dalal Street, Anuj Gupta, a SEBI-registered market expert, said, “Even though we end up with a deceptively looking normal monsoon season, it is not true. We experienced an erratic, weak monsoon this year, which is expected to affect our foodgrain production. A lower foodgrain production is expected to create a demand-supply constraint, a development which may put pressure on the government’s exchequer.”
The SEBI-registered market expert said that low crop yields, higher food inflation, higher interest rates, etc., are expected to weigh on the Indian stock market, despite the majority of Indian stocks trading at attractive valuations.
Disclaimer: This story is for educational and informational purposes only. The views and recommendations above are those of individual analysts or broking companies, not Mint. We advise investors to check with certified financial experts before making any investment decisions.
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