Bears kept a grip on the market with benchmark indices closing in the deep red on Monday.

Market began on a weak note amid weak global cues. Indices slumped further during the day amid broad-based selling. Though recovered from the day’s low, indices closed lower, dragged by IT and financials, tracking losses in heavyweights Infosys and HDFC twins.

The BSE Sensex closed at 57,166.74, down 1,172.19 points or 2.01 per cent. It recorded an intraday high of 57,420.80 and a low of 56,842.39. The Nifty 50 closed at 17,173.65, down 302.00 points or 1.73 per cent. It recorded an intraday high of 17,237.75 and a low of 17,067.85.

Breadth favours decliners

The market breadth was in favour of the decliners with 2,062 stocks declining on the BSE as against 1,462 that advanced, while 146 remained unchanged. Furthermore, 11 stocks hit the upper circuit as compared to the three stocks that were locked in the lower circuit. Besides, 237 stocks touched a 52-week high level and 17 touched a 52-week low.

The volatility index rose 8.71 per cent to 19.34.

S Ranganathan, Head of Research at LKP securities said, “Indices opened gap down on the back of weak global cues as the Federal Reserve tightens policies to tame inflation. Benchmark Indices never really recovered during the day from the twin blow of the IT Index & the Bank Nifty with rising oil prices and inflationary pressures adding to the woes. The broader markets did see buying interest in select pockets like Defence, Paper & Fertilisers on the back of continued positive Tailwinds.”

Infosys, HDFC twins drag

Vineet Bagri, Managing Partner- TrustPlutus Wealth said, “The market opened in the red today as it factored in the HDFC Bank and Infosys results, both of which displayed some weakness. The cascading effect of the same has seen the other banking and IT stocks too on the losing side. More importantly, the dip in the market has been sharp since Banking and IT sector account for over 50 per cent of the Nifty index weight.”

“If we see further dips this week, we believe sentiments would sour further and risk averseness would go up considering the fact that the result season has not started off on a good note,” said Bagri.

Vinod Nair, Head of Research at Geojit Financial Services said, “Unfavourable start to earnings season in heavyweight stocks of IT and banking sector led to heavy sell-off.”

“Lower-than-expected results prompted the market to worry about the headwinds faced by IT sector like attrition, wage inflation, lower utilization, and cut in IT spending by industries due to geopolitical and macro issue. The degree of downfall is high because the sector was trading at high valuation and risk of a downgrade in outlook has increased,” added Nair. 

Infosys and HDFC Bank stocks dragged after the companies reported weaker than expected results . Infosys was down over 7 per cent at closing on the NSE while HDFC and HDFC Bank were down nearly 5 per cent each. 

NTPC, SBI Life, HDFC Life, Tata Steel and Maruti were the top gainers on the Nifty 50 while Infosys, HDFC, HDFC Bank, Tech Mahindra and Apollo Hospitals were the top losers.

WPI inflation

Investor sentiments were also impacted by WPI inflation numbers reported today. The wholesale price-based inflation rose to a four-month high of 14.55 per cent in March, primarily due to hardening of crude oil and commodity prices.

Raghvendra Nath, Managing Director – Ladderup Wealth Management Private Limited said, 

“This was the highest month on month WPI increase experienced by the economy since the WPI series began in 2004. The margins of companies across sectors may further face headwinds for at least next 2 quarters, owing to the Russia-Ukraine war as it continues to affect commodity and food prices, fresh set of restrictions if implemented due to the rising Covid cases can again be troublesome for the economy.”

“Amidst increasing pressures on the profit margins of manufacturing companies and a pickup in consumption demand, Acuité expects a further pass through of input costs. We expect persistent supply side bottlenecks and high commodity prices to hold the core inflation at double digit levels in the near term,” as per Suman Chowdhury, Chief Analytical Officer, Acuité Ratings & Research.

Rising US bond yields, inflation concerns, geopolitical tensions and concerns regarding increasing Covid-19 cases in parts of the world have also impacted investor sentiments, as per analysts. 

Naveen Kulkarni, Chief Investment Officer, Axis Securities said, “We expect FY23 to witness continued volatility in equity markets, especially in the first half of the year with rising interest rates globally and high inflation, which is expected to persist. In this scenario, we expect money to move from long-duration debt funds to equity funds in the second half of the year, which should bode well for equities.”

Auto, FMCG, metals in focus

On the sectoral front, while IT and financials dragged, auto, FMCG and metals gained focus.

Nifty IT closed 4.58 per cent lower. Nifty PSU Bank was down nearly 2.5 per cent while Nifty Financial Services closed over 2 per cent lower. Nifty Bank and Nifty Private Bank were down nearly 2 per cent each. 

Meanwhile Nifty FMCG closed 0.60 per cent higher while Nifty Auto was up 0.44 per cent. Nifty Metal was up 0.33 per cent.

Broader indices

Broader market also faced pressure with broader indices closing in the red.

Nifty Midcap 50 was down 1.22 per cent while Nifty Smallcap 50 was down 1.61 per cent. The S&P BSE Midcap was down 0.95 per cent while the S&P BSE Smallcap was down 1.01 per cent.