Technical Glitch Throws A Spanner In Nifty’s Works

The Indian stock market, in its early trades today, witnessed some technical issues that caused the National Stock Exchange (NSE) to halt its trades. Trades halted for around 15-20 minutes in this period. The Nifty Index could not be updated, as a result of which, there was chaos on the streets. At a point of time, the Nifty was showing a low point of 4888 levels, which was down by a surreal 900 points or 15% from its yesterday’s closing. Due to market participants who usually carry out arbitrage trading and also on account of Algo trading, the Sensex also showed a sudden drop that was not accurate. According to Business Standard, stocks like Sesa Goa, State Bank of India, Axis Bank, Cipla, HCL Technologies, Bharti Airtel, Hindustan Unilever and Tata Motors quoted 6%-17% lower on the NSE.

According to Bloomberg’s reports, 59 erroneous orders were responsible for a plunge and halt in trading today that briefly erased about US$ 58 billion in value from Asia’s fourth-largest market. The report further said that the orders entered by Emkay Global Financial Services for a client that led to trades valued at Rs 6.5 billion (US$ 126 million) caused the problem.

The markets, however, soon resumed trading and were higher by almost 0.3% at around 10 am (Sensex trading at the 19100 levels and Nifty trading above the 5800 mark).

While markets participants had expected the markets to have a gap up opening in its early trades with Nifty crossing the 5850 mark, the same was not achieved as it started on a soft note and then moved lower into the negative territory. This was despite the strong reforms measures taken by the government yesterday, wherein it increased the foreign direct investment (FDI) cap in insurance, opened up FDI in pension and and also approved the Companies Bill, 2011. The markets are welcoming the reforms measures passed by the Cabinet, but the passing of these reforms in the winter session of Parliament remains a key concern. Earlier too, the Companies Bill was approved by the cabinet, but did not go through in the Parliamentary session.

Also, from the Technical Analysis point of view, the markets seem to be in an overbought position, and hence, a correction seems to be on the cards. The markets have also touched the upper end of the trend line, where it has been consistently facing resistance for the last couple of trading sessions.

We, at Dalal Street Investment Journal, had kept our readers updated about the markets’ continued uptrend on a weekly basis for the last four weeks. Hence, one could expect some technical correction for the markets in the near term.