Why did the markets correct so sharply on 11-November and how do you see the Nifty behaving on Friday 12-November?

On 11-November, the Nifty fell sharply by 144 points and closed at 17,873, well below its psychological level of 18,000. That has been a major resistance for the stock for the Nifty for some time now. The fall on Thursday came after US inflation scaled to a 31-year high of 6.32%. That raised the possibility of the US Fed front-ending Fed rate hikes.

One of the most popular breadth of market indicators, the advance decline ratio, was sharply negative at 8:41 on11-November. Due to the risk of higher inflation, most of the financials across banks, NBFCs and insurances were under pressure. Metals gained on expectations of stellar results from Tata Steel, and the company did not disappoint.

Foreign investors net sold Rs.1,637 crore of equities on Thursday while domestic funds bought Rs.446 crore of equities. Clearly, it looks like the higher US inflation has made FPIs cautious about emerging markets like India. Globally, the NASDAQ was in the green while Dow was in the red. SGX Nifty is 30 bps higher in early trades.

There is likely to be some caution ahead of the weekend as the markets are in uncertain zone. While the open may see some bounce, traders are likely to wind down open positions and stay light over the weekend.