Market reversal: Sensex loses 331 points, Nifty below 25,950; IT stocks are gaining

Indian benchmark indices gave up early morning gains to end lower on Monday even as IT stocks had a good run on expectations of the Federal Reserve’s December rate cut. The 30-share Sensex fell 331 points or 0.39%, while the broader Nifty index fell 0.4% to settle below 26,000. Analysts said Nifty is seeing repeated rejections from the 26,200 resistance zone.In the Sensex pack, only five stocks — Tech Mahindra, Asian Paints, Infosys, Adani Ports, Sun Pharma — ended in the green, while the rest suffered losses. BEL fell the most, down just over 3%, followed by Mahindra and Mahindra (M&M) and Tata Steel.

Sector-wise, Nifty IT gained the most at 0.41%, while auto, pharmaceutical and metal indices ended the day with cuts. Tech Mahindra, Wipro and Persistent Systems led the IT rally. IT companies, which generate a significant portion of their revenue from the US, gained as the likelihood of a US rate cut increased in December after New York Fed President John Williams said rates could fall “in the near term”.

Expertly taken

“Investor sentiment remained cautious, anticipating the risk of major events such as delays in finalizing the US-India interim trade deal. Nevertheless, selective buying of IT stocks provided some support,” said Vinod Nair, head of research at Geojit Investments.

On a more positive note, global markets remain optimistic, fueled by renewed expectations of a Fed rate cut in December, driven by downside risks to US employment data.

“On the national front, favorable macro indicators including GDP growth, controlled inflation, stable oil prices and strong earnings prospects for the second half of the year have contributed to market stability,” Nair added. With no major domestic macro announcements planned before Friday’s GDP data, analysts say markets will remain sensitive to US inflation data, commentary on the interest rate trajectory, the dollar index and foreign flows.

Asian shares go a step higher

Asian markets moved higher on Monday, with the MSCI Asia ex-Japan index rising 0.8%. Indonesian shares reached a record high. The MSCI Emerging Asia stock index rose 0.6%, recovering from Friday’s 3% decline.

The Indonesian benchmark index rose as much as 1% to its record level. Shares in Taiwan rose 0.3%, while shares in Thailand rose 0.2%.

Technical view

The markets remained under pressure for another session with Nifty falling below the key psychological level of 26,000. Analysts said the next crucial support is at the 21-DMA around 25,850, and a breakdown below could push Nifty further towards 25,700.

“Conversely, a move above 26,180 would improve sentiment and possibly open the way to 26,300. As the monthly F&O expiry of the November series approaches, increased volatility is expected and Nifty is likely to fluctuate within a broader range of 25,800-26,200,” said Nilesh Jain, Head – Technical and Derivatives Research Analyst at Centrum Broking.