Markets feel credit crunch; Sensex support 12400

MUMBAI: The worst credit crisis facing the world’s central banks saw markets take a beating on Monday, even as the US readied a $700 billion bailout plan.

Indian stocks were no different, as the benchmark Sensex and Nifty breached key supports.
Players battered the markets on fears there will be more corporate failures and the US bailout plan may fail to resolve the credit crisis.

National Stock Exchange's 50-share Nifty closed the day 3.39 per cent lower at 3850.05 and Bombay Stock Exchange’s Sensex fell 3.87 per cent to 12595.75. Intraday, Nifty touched a low of 3777.30 and Sensex took support at 12402.84.

Said Ashok Jainani, Vice-President (Research & Market Strategy) Khandwala Securities, “The past week's trend continues as the two major events -- modified Wall Street rescue plan and Indo-US nuke deal -- still remain on the table and the crisis situation has yet not been resolved. Market sentiments are mostly being driven by news and short-term technical charts at present.”
At current levels, Sensex could find a lower support near 12,400 level and Nifty near 3,750. Many of the frontline stocks look attractive for a medium-term perspective, on hopes that they would report good Q2 results, Jainani said.

“Unwinding of FII liquidity, which had caused Sensex underperforming, and multiple contraction might ebb, with new initiatives being considered by SEBI next week,” he added. Thus, investors could buy front-line stocks at their lower levels.

“Market is reacting on the weak global sentiments that have spread across from US to European and Asian markets, weighed by liquidity crisis. Real investors are scared of weak fundamentals ahead and fear that efforts being made by the major global economies are not enough,” said DD Sharma, head retail research, Anandrathi Securities Ltd.

Sharma believes that in India, most of the potential institutional investors are keeping away due to global uncertainty, even though the fundamentals are comfortable and it is the right time to enter the market.

Mirae Asset Global Investment Management says, “The present downtrend is due to big uncertainty on liquidity side and de-leveraging by institutional investors, domestic as well as foreign, even though the fundamentals are still positive of the country.”

Both, Anandrathi and Mirae expect Nifty to find support between 3,750 and 3,800 and after that a bounce back is possible.

Nifty had hit below the 3,800 level for the third time and then recovered this year.

via:E.T