Sensex tanks over 500 points; Nifty below 12,200; key reasons

The benchmark equity indices tanked over 500 points in the early trade Monday amid rising fears in the middle east after the US strike killing Iran’s top general.  The 30-share BSE index was trading 509.31 points or 1.23 per cent lower at 40,955.30. Similarly, the broader NSE Nifty cracked 154.70 points or 1.27 per cent to 12,071.95.  In the previous session, the 30-share gauge ended 162.03 points, or 0.39 per cent, lower at 41,464.61, while the Nifty closed 55.55 points, or 0.45 per cent, down at 12,226.65. SBI was the top loser in the Sensex pack, followed by Maruti, Asian Pant, Hero Moto Corp, NTPC, ICICI Bank and HDFC. On the other hand, Titan, TCS, and Tech Mahindra were the only stocks trading in the green.

“Markets tanked in the early trades today, largely in response to the escalation of tension between the US and Iran. A sharp surge in the crude and weakness in the rupee has raised fear of uptick in the inflation, which could, in turn, result in the status quo by the RBI in the next policy review meet. Also, a report that the government may not announce further capital infusion in the PSBs in the upcoming Union Budget further dented the sentiment,” Ajit Mishra, VP Research, Religare Broking told Financial Express Online. The overbought conditions combined with a strong hurdle at 12,300 in Nifty was signaling the possibility of decline, he added.

“The markets have seen a gap down opening following escalated tensions in the west Asian region. Having said this, the NIFTY has drifted below the critically important 12103 levels. The 12103 level is important as it represents a double top resistance point which the NIFTY took out on its way up while achieving a breakout. So, during a downtrend, this level is expected to act as potential support”, Milan Vaishnav, CMT, MSTA Consulting Technical Analyst told Financial Express Online.

During such knee-jerk reactions to geopolitical tensions, anecdotally speaking, such downsides have been bought at lower levels. It would be important to see if this happens in the present case. If this has to happen, it would be important for the NIFTY to crawl back and stay above 12100 zones on a closing basis, he also said. The Brent crude futures surged nearly 3 per cent to USD 70.59. The rupee depreciated 25 paise to 72.05 against the US dollar in the morning session

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Meanwhile, on a net basis, foreign institutional investors bought equities worth Rs 1,263.05 crore, while domestic institutional investors sold shares worth Rs 1,029.20 crore on Friday, data available with stock exchanges showed.