Bear grip is getting tighter, Nifty can vouch for that

The negative sentiment on the market can be judged from the fact the two out of every three stocks in the Nifty index is trading near its 52-week low. Out of the 50 stocks in the Nifty, 33 are trading within 10 percent of their lows. Of these, 26 of them - nearly 50 percent of Nifty - touched their yearly lows in the last one week.

Among the sectors that have been worst hit is banking, followed by automobiles and metals. Rising inflation is making things worse as it has forced the central bank to maintain high interest rates. Analysts are playing their part too, with their sectoral downgrade on account of banks’ soaring bad loans. As if this was not enough, companies are taking a blow from rising raw material prices and lower demand.

Higher interest rates have impacted the automobile sector, which saw a drop of over 15 percent in car sales for July. This is the first time in 30 months that sales have tripped after an uninterrupted growth line. Higher prices of diesel and petrol have only added to the burden.

Metals, too, have been hit hard across the globe due to recession concerns. This, coupled with fears relating to the draft mining bill that will jack up costs, has also led to a fall in metal counters.

August saw broking houses realigning their stock and portfolio recommendations, post the first quarter numbers. There were very few positive surprises among Nifty stocks. This, along with worsening global scenario, has led to analysts scaling down their outlook for the stocks.

A lower-than-expected performance by companies in the first quarter has triggered a fresh bout of selling. Selling volumes picked up as S&P downgraded US bonds. The fresh European crisis further spooked markets across the globe, which saw bond markets rising. A rising bond market generally signals a bearish trend for equities.