Nifty hits 6-month lows to end below 5400

Bears embraced the Dalal Street on Friday by taking complete charge over bulls and forced the benchmark Nifty to shut shop below 5400 level - another important psychological level - for the first time since July 30, 2010, despite quiet to positive global cues. The sell-off by foreign investors could be the reason behind today's crash, which could be meant that foreign investors were slowly pulling out money from India for investing in other asset classes.

Bajaj Auto was the only share among Nifty 50 & Sensex 30 shares supported by bulls while others reigned by bears. All sectoral indices slaughtered in today's carnage. The broader indices too fell but less in comparison with the benchmarks.

Sashi Krishnan of Bajaj Allianz does not think the headwinds are over yet. He said we could see further correction in the market for a couple of reasons. "The interest rate tightening cycle is one of the reasons. Reserve Bank of India (RBI) is not over yet with the rate tightening cycle. Secondly, with the US recovering, the rupee continuing to depreciate, we may see a lot more FII withdrawals over the next few days," he explained.

"For the month of January, we have seen the FIIs take out close to a USD 1 billion and that made the market correct about 10% to11%. We see further FII withdrawals from the market and the markets could still be under pressure. Third, globally the risk perceptions are increasing dramatically. The uprisings in Egypt and Tunisia, the oil prices crossing USD 100 per bbl – all these global issues will put lot of pressure. These will also change sentiment towards developing markets," he added.

Technically Laurence Balanco of CLSA said, "The Nifty has tagged the 5300-5500 support zone that we have been citing, but with no sign of bullish price momentum divergence." He feels that further losses are likely in the coming sessions.

The 30-share BSE Sensex plunged 441.16 points or 2.39%, to close at 18,008.15 and the 50-share NSE Nifty tanked 131 points or 2.37%, to settle at 5,395.75. However, European markets were trading 0.5% higher, at the time of closing of Indian equities. Nikkei was up 1% while other Asian markets were shut.