Indian equities were trading weak carrying over the negative sentiment from the previous trading session amid weak Asian cues.
The Sensex had dropped 383 points on Friday as the markets gave a thumbs down to Governor Raghuram Rajan's first credit policy announcement.
At 11.40 am, the BSE Sensex was trading at 19,989.06 points, down 1.36 per cent or 274.65 points from Friday's close. The Nifty index was down 1.47 per cent or 88.65 points at 5,923.45.
Banking and realty stocks succumbed to heavy selling pressure and were down 3.75 per cent and 2.88 per cent, respectively followed by capital goods 2.11 per cent and PSU 1.72 per cent.
On the other hand, IT, consumer durables and TECk stocks capped the Sensex losses and were up 1.43 per cent, 1.39 per cent and 0.79 per cent, respectively.
Wipro, Hero MotoCorp, Sesa Goa, Infosys and Cipla were the top five Sensex gainers, while the top five losers were SBI, ICICI Bank, HDFC, Bharti Airtel and Maruti.
'Brace for a further fall'
A HDFC Securities report cautioned that markets must brace for a further fall. The report said: "The markets have done an about turn. Brace for a further fall. The markets were hoping for a rate cut and they got a repo rate hike. The market’s swoon on Friday only partially discounts the development. Thursday’s post Fed rally has authored an expanding triangle in the Sensex. Expanding triangles have bearish connotations."
The report also drew attention to the fact that many of the US Fed's Open Market Committee members are expected to talk this week and this may trigger more confusion.
Support for Nifty
The report added that if the support of 5,798 breaks, the Nifty could retrace its steps to 5,688 and 5,552. It said that the attention of the markets is going to come back to FMCG and cement, but there should be no hurry.
Repo rate hike
While agreeing with the RBI decision to hike the repo rate, the report said that considering the increase in repo and reduction in marginal standing facility, banks are better off post this policy than what they were post the July intervention of RBI.
Hedging currency exposures
But high rates are here to stay and urged corporates to get used to it. It also drew attention to the need for hedging currency exposures by Indian corporates. Now that the rupee has come off the lows of 68.80, they should at least hedge now, the report said.
Asian stocks were trading weak as investors stated weighing down the Fed stimulus outlook after a Federal Reserve policy maker said that a small taper may occur next month.
Japan's Nikkei was down 23.76 points or 0.16 per cent at 14,742.40, Hong Kong's Hang Seng shed 100.64 points or 0.43 per cent to 23,401.90 and Australia's S&P/ASX 200 was down 24.19 points or 0.46 per cent at 5,252.50.
The negative sentiment was despite upbeat manufacturing data from China. Global banking giant HSBC today said its preliminary purchasing managers’ index for the manufacturing sector in China hit 51.2 in September, the highest since March when the index stood at 51.6.
The upbeat Chinese manufacturing data showed a promising pick-up in export orders, another sign of stabilisation in the world's second biggest economy.
The Dow Jones industrial average had ended with a loss of 1.2 per cent, while the S&P 500 Index had eased 0.7 per cent on Friday.
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