Spooked by the crackdown on suspected shell companies by Sebi, geo-political tensions surrounding around North Korea and disappointing earnings, markets posted their worst weekly performance since February 2016.
Benchmark indices Sensex and Nifty ended 1,111 points and 355 points lower to close at 31,214 and 9,711 respectively.
Sell off in the broader markets saw BSE mid-cap and small-cap indices correcting by 4.6 per cent and 5.6 per cent.
Indication from the mid-term Economic Survey of likely failure in meeting the upper end of FY18 economic growth forecast of 6.5-7.5 per cent, Doklam standoff, and Sebi order to ban trading in 331 ‘shell companies’ dampened market sentiment.
The survey said achieving the high end of the 6.75-7.5 per cent growth projected previously will be difficult due to an appreciation of the rupee, farm loan waivers and transitional challenges from implementing GST.
The survey noted that asset prices, particularly the stock market, had run away from the underlying real economy indicators, and questioned whether this indicated rational confidence or irrational exuberance. Cracks in the rally led some investors to put their cash in havens like precious metals.
Near-term direction will be dictated by inflation data, last batch of Q1 results, progress of monsoon rains, investment by FIIs and DIIs, the movement of rupee against dollar and global cues.
For the week ahead, chartists predict trading range of 30,700-31,800 and 9,525-9,925 for the benchmark indices. Support for the indices evident at 30,950 & 30,700 and 9,625 & 9,525.