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The possibility of a lockdown in key States like Maharashtra amid rising Covid cases spooked financial and stock markets on Monday.
The Sensex opened the week falling 1,707 points, or 3.44 per cent, to close at 47,883. The Nifty index declined by 524 points, or 3.53 per cent, to close at 14,310. The bank Nifty Index broke through even the lows of February during the post-Budget market crash. Today, the index dropped 1,656 points, or 5.1 per cent, to close at 30,792.
On Monday, the rupee slipped below the 75 mark for the first time in about nine months, depreciating to a low of 75.145. Intraday, it had tested a high of 74.78. It closed weaker at 75.055 to the dollar, down about 32 paise over the previous close of 74.73.
According to Deepak Jasani, Head of Retail Research at HDFC Securities, investors were worried about the economic fallout of the fresh surge in Covid-19 cases. “These developments could jeopardise the market’s assumption of around 11 per cent GDP growth and above 30 per cent Nifty earnings growth,” he said.
Still, experts also feel the panic in stock markets could subside in the coming days as on the technical charts the key indices Sensex and Nifty hit a double-bottom, that is, touching the same low levels twice, after an interval, and rising higher from those levels. Also, the flow of foreign funds depends on the global liquidity scenario that remains robust, experts say.
Even as stocks fell in India, there was stability in the global markets. In fact, the US stock markets have been trading at record levels. Analysts say that the market crash of February and March 2020 was a global meltdown as there was fear of the unknown due to the Covid, which is not the case now.
There is a high possibility of a sharp move on either side. If sustainable buying emerges from hereon, the Nifty could show upside bounce up to 14,800-14,900 levels in the coming weeks. A decisive move below 14,200 is expected to drag the Nifty down to 13,700-13,600 levels by this month,” said Nagaraj Shetti, technical analyst at HDFC Securities.
FPIs on selling-spree
Foreign portfolio investors sold stocks worth ₹1,746 crore in the cash segment on Monday. In the futures and options segment, the FPIs were net sellers of ₹1,740 crore worth index futures and ₹397 crore stock futures. The FPIs have index futures worth ₹2,415 crore and stock futures worth ₹3,240, implying that they had gone short on the markets this month.
Nifty Index futures of around ₹17,777 crore were outstanding as on Monday as were Bank Nifty futures worth ₹6,082 crore. The positions do not indicate any extreme build-up of bullish or bearish bets, but a reversal in sentiment is necessary for the markets to recover from Monday’s fall, experts say.
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