The BSE Sensex and Nifty are trading near 13 months low and have declined 17% from the 2015 High which we saw on 04 March 2015. In Just 6 months Stock market have wiped out the gains made in past 13 months.Let me put the reason from both Technical and Fundamental Perceptive Sensex corrected by 500 points Nifty almost 200 Points making today as Black Friday.I am discussing few points below which would had led to the correction.
- Concerns over Fed rate hike
Equity Market likes liquidity, Friday Strong US jobs data and Unemployment rate coming sub 6% fueled expectations that the US Federal Reserve may raise interest rates sooner than previously thought.
- Expensive valuations of Stock Market
Valuation for Indian markets at 19.4x on FY15E (16.6x on a rolling one year forward) and 22.5x on CAPE basis which are above long-term averages.
- No Pick up in Earnings growth
Dollar gaining strength
The dollar index is gaining strength against basket of currencies including rupee. Yesterday Mario Darghi has also said to increase QE which will further weaken Euro and Dollar will rise is due course.
- Slowdown caused by China and Yuan Devaluation
Global stock markets are tumbling after a survey showed Chinese factory activity contracted at their fastest pace since the depth of the global financial crisis in 2009. Fears of a China-led global economic slowdown drove Wall Street, previously seen as a safe-haven, to its steepest one-day drop in nearly four years on Friday.
- Rupee at lowest since September 2013
Rupee slumped to as low as 66.48 per dollar on Monday morning. It is lowest since September 2013, as Asian markets reeled under fears of a China-led global economic slowdown.
- Trading below 200 DMA/8000 Level : Nifty/ Sensex are trading well below its 200 DMA, putting pressure on market, as many FII’s have 200 DMA benchmark for buying or selling.Break of sacrosanct level of 8000 and closing below it for 2 week is sign of weakness.
- Gann Date Effect- As discussed in Weekly Analysis Gann/Appoint and Gunner plays an important role in finding impulsive move, all studies were pointing towards a big move.
- NF opening volume in first 15 mins was 25 Lakh highest seen in past 2 years suggesting serious long liquidation by smart money.