What is your stock market view on 20th October after the sharp fall in the markets on Tuesday? Is the Nifty likely to struggle to break above 18,500?

On Tuesday, the Nifty did open and held through the first half. However, the Nifty gave up all its gains and a lot more by the close of the day as the Nifty ended 58 points lower at 18,418. I will come back to the resistance part later, but the two factors that spooked markets were the China GDP slowdown and cost spikes in Indian companies like HUL.

The concerns were depicted in the sharp deterioration in the A/D ratio or the advance decline of the Nifty at 16:34 on Tuesday. The stock that had rallied smartly in the last few weeks, ITC, came under pressure on worries that the GST duties could once again be hiked, as is the normal practice. HUL corrected despite good results on cost spike concerns.

Foreign investors were net sellers of Rs.506 crore of equities while domestic funds sold Rs.2,578 crore. Domestic selling has been harsh and consistent in the last few days. In global market trends, Dow ended 60 bps higher while NASDAQ was 71 bps up. European indices were flat to mixed on China growth concerns. SGX Nifty is 11 bps higher in early trades.

I am not sure if the concerns are about the 18,500 levels and that is jut incidental. There are two major concerns for markets. The first is that cost spikes are putting pressure on the profitability of most Indian companies and HUL was an example. The second concern is on a likely hard landing in China. These are the issues that will drive markets.