Share market indices suffered strong losses in the second half and ended sharply lower on Friday as investors booked profit in auto, financial and banking stocks. Declining for the fourth straight session, the S&P BSE Sensex ended 434 points lower at 50,889 and NSE Nifty 50 index fell by 137 points to 14,981.
Mid and small-caps were underperforming as the BSE Midcap and Smallcap indices were down 1.93% and 1.01%, respectively.
Tracking bearish direction from Asia, Europe and Wall Street, Sensex ended 379 points lower at 51,324 and Nifty fell by 89 points to 15,118 on Thursday.
Here's a look at five factors that led to another fall in Sensex and Nifty today:
1. Weak global cues
Overseas, Asian stocks continued trading mixed on Friday following overnight declines for the major indexes on Wall Street amid rising bond yield and inflation. European shares made modest gains today.
US stocks declined on Thursday as investors were discouraged by worse-than-expected jobless claims. Traders said investors gave importance to rising bond yields in the US and the outlook for inflation
Dr. V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services said,"Markets globally have been consolidating and even slowly drifting down during this week. This trend is due to high valuations and the absence of any fresh positive triggers to take the market higher. This trend might linger for some more time before some trigger leads to a breakout."
As per analysts, the domestic market outlook lacks any major upcoming economic event and the overall global consumer sentiment would play an important role in evaluating the short-term trend.
Further, equities took cues from weak oil prices. Crude oil prices slid another 2% today, on worries that refineries shut by a big freeze in the US South will take some time to revive operations and dent crude demand.
Benchmark indices ended lower for the fourth straight session due to profit booking. Markets hit new record highs earlier this week on Tuesday, as local equities saw healthy inflows since the announcement of the Budget, amid sustained FII inflows and continuation of accommodative monetary policy.
Traders, however, construed today's session as a minor profit booking after the recent rise to lifetime highs and said markets are experiencing correction after significant gains made post the Union Budget and positive quarterly results. Sectors too saw profit booking in index heavyweights from all-time highs. All sectors witnessed heavy selling pressure today, with PSU Banking dropping over 4%, followed by a 2% fall in auto and over 1.5% decline in metal and private banking index.
3. Covid- 19 cases
Among local factors, fresh concerns over the increase in the number of infected COVID-19 cases contributed to the fears that the economic impact will be much larger than earlier estimates.
Further, reports suggested lockdown may be re-imposed in the financial capital of the country, Mumbai also kept investors at the edge. This was after the Brihanmumbai Municipal Corporation issued fresh guidelines in Mumbai amid rising cases of Covid 19. As per media reports, lockdown is being re-imposed in other districts in Maharashtra as well.
S Ranganathan, Head of Research at LKP Securities said, "Profit Taking was evident throughout the day as we witnessed several Pivotals succumbing to selling pressure as traders feared rising covid cases in Maharashtra. The PSU bank index which rose 12% in the last two days shed 5% today."
4. Banking stocks crash
Broader markets tracked underperformance from the banking sector. ICICI Bank, Axis Bank, SBI, HDFC Bank, Bajaj Finance and HDFC were leading losses in the Sensex pack today. ICICI Bank, HDFC Bank and Kotak Mahindra Bank were among the top three drags on Nifty 50.
Nifty PSU Bank index fell more than 5% intraday and closed 4.7% lower today, while Nifty Bank and Financial Services indices fell by 2% and 1.5%, respectively.
Even PSU Bank stocks ended deep in red after the index rallied in early trade following news of India shortlisting four state-run lenders for possible privatisation.
5. Technical outlook
Sensex and Nifty were trading with notable losses, led by selling pressure in auto and banking sectors and settled around the day's low. The broader mood of the market turned bearish yesterday, after a few days of the lacklustre movement.
During the week, the indices have corrected by 1.5%. However, both are up 6% each since the beginning of the year.
Expressing views on the Nifty index falling back below 15K mark, Ashis Biswas, Head of Technical Research at CapitalVia Global Research said," The expected levels of the market are likely to be in the range of 14860 and 15250, and it's going to crucial for the short-term market scenario to sustain above the 14860 Nifty 50 Index level. Therefore, The short-term traders use the rally to exit while buying any dip towards the support level around 14860-14840. The market breadth to deteriorate, indicating a likelihood of higher volatility."
Most market analysts see further consolidation in markets, in absence of any major trigger.