Inflation spook Bulls

Inflation spook Bulls 

The market opened with a gap down and tumbled amid higher-than-expected US inflation data. Selling intensified as the day progressed because of the long positions of the previous week. Inflation spook bulls and the Nifty closed 2.64 percent down at 15774.

The US inflation jumped to 8.6 percent in May, recording the highest inflation rate in the last 40 years. The market expects the US Fed to raise the interest rates by 50 bps to tame inflation. However, the worry is that the Fed might act aggressively and drive the interest rates sharply higher.

Nifty recorded an intraday high of 15886 and a low of 15684 and stayed below the 20-day simple moving average. Similarly, the Nifty Bank also witnessed heavy selling. It was down 3.13 percent today.

The market breadth was negative, and the advance-decline ratio was 0.13. It is the lowest reading of the advance-decline ratio in the last two months. Further, the volatility index was up by 14.25 percent and closed at 22.37. Likewise, the FIIs remained net sellers today.

NIFTY – DAILY MARKET ACTION
Advancers – 244
Decliners – 1942
52Wk High – 13
52Wk Low – 171
High Band Hitters – 49
Low Band Hitters – 195
200d SMA – 17262
50d SMA – 16753
20d SMA – 16312

Top Gainers and Losers

Nestle India, and Bajaj Auto were the only two gainers with marginal gains on the Nifty 50.

TOP GAINERS
NESTLEIND +0.49%
BAJAJ-AUTO +0.08%

Meanwhile, Bajaj Finserv, Bajaj Finance, Tata Motors, IndusInd Bank, and Hindalco were the top losers on the Nifty 50, losing between 4 percent and 6 percent.
View the list of all the Nifty 50 contributors.

TOP LOSERS
BAJAJFINSV -6.74%
BAJFINANCE -5.21%
TATAMOTORS -5.03%
INDUSINDBK -4.98%
HINDALCO -4.86%

Sectors & Broader Indices

All sectoral indices closed in red because of broad-based selling throughout the day. 

Likewise, the broader indices were also under pressure. Nifty Midcap 50 was down 3.04 percent, and Small-cap 50 was down 4.31 percent.

Nifty Sectors – Notable Action
IT -4.12%
Media -3.97

Looking Ahead – Inflation & Bulls

The nervousness in the market is not because of the expected rate hike by the US Fed. Instead, the Fed might hike the rates at a faster pace. We know the interest rates are rising, but we want it at a slower pace! 

As noted in the weekly blog, the Nifty has been in a box of 15800-16800 levels for over a month. For the upcoming week, the bias is negative, and the chances of breaking down from the box are higher. 
Nifty has broken down the box of 15800-16800 and is charting in the negative territory. Further, the Nifty is below the 20-day, 50-day, and 200-day simple moving average price. Therefore, the bias is negative because of headwinds relating to interest rate hikes by the central banks.

Daily Pivots

Read our previous -Daily Insights- here
Nifty plays catch-up
Struggle for Direction
Risk-on or Risk-off?

15650 to 15900 is the Nifty trading range for tomorrow. Because of heaving selling today, it’s possible that we might see some relief rally during the week, especially on Wednesday/Thursday when the Fed announcement comes. Inflation spook Bulls and the struggle for the market direction stays as is.

This article is only for educational purposes and is not an investment advice.