Sensex, Nifty50 close nearly 2% down tracking global markets and ahead of RBI rate hike decision

• The Sensex closed 1.6% lower while the Nifty50 ended 1.8% lower on Monday.
• Analysts feel Nifty50 may again go below 17,000 levels if global weakness persists– leading to sell off by foreign investors.
• In the last five days, the Sensex has already lost 4.4% on weak global cues led by the US Fed signaling aggressive interest rate hikes in the future.

The benchmark Sensex and Nifty50 indices closed almost 2% lower on Monday, tracking global markets and ahead of RBI’s monetary policy meeting that will decide the course for the market.

The Sensex closed 1.6% lower at 57,145 levels while the Nifty50, which had slipped a tad below the 17,000 level earlier in the day, ended 1.8% lower at 17,016.

Analysts feel the Nifty50 may again go below 17,000 levels if global weakness persists – leading to a sell off by foreign investors.

"Market fall has more to do with the global weakness, so, as long as global markets continue to fall, we will also fall because that creates a sentimental pressure on the FPIs (foreign portfolio investors) who come to sell in India. So, while the RBI event is among the reasons for the fall, I think at these prices, it may be discounted. If global cues remain weak Nifty50 may go below 17,000 points," Deepak Jasani, head of retail research at HDFC Securities, said.

In the last five days, the Sensex has already lost 4.4% because of weak global cues led by the US Fed signaling aggressive interest rate hikes in the future.

It is also widely expected that the RBI would follow the Fed’s lead and raise interest rates on September 30. RBI has already raised interest rates by an overall 140 basis points three times in a row.

“Global cues are expected to dominate this week as well, but RBI policy and September F&O expiry will lead to volatility in our market. US GDP and unemployment numbers will be important. If we look at F&O data, the short exposure of FIIs in the index future has jumped to 80%, which means sentiments are weak but the market is hedged,” Santosh Meena, head of research at Swastika Investmart said.

Adding to the woes, the rupee continues to depreciate as it touched 81.67 on Monday on the back of monetary policy tightening by central banks and on concerns about India’s record trade deficit. It is expected to touch 82 levels.

“We expect volatility to remain high as we have important events like MPC’s monetary policy review meet and monthly derivatives expiry scheduled during the week. Besides, the prevailing pressure in the global indices would continue to weigh on the sentiment. It seems like markets are finally giving in to the pressure of global indices, especially the US, and are likely to inch further lower ahead,” Ajit Mishra, VP - research at Religare Broking said.

Auto, bank and metal indices were the biggest laggards, ending down 3.8%, 2.4% and 4.1% respectively, on Monday. IT stocks were the only gainers, with the IT index closing up 0.6%.

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