Sensex and Nifty closed lower on Tuesday, led by weak Asian and European equities as worries of new lockdowns to stem surging coronavirus cases kept investors cautious worldwide. Besides stock-specific action, weak inflation data and US-China tension dampened investor sentiment on domestic grounds. While Sensex ended 660 points lower at 36,033, Nifty closed 195 points lower to 10,607. Yesterday, Sensex ended 99 points higher at 36,693 and Nifty rose 47 points to 10,815.
IndusInd Bank, Bajaj Finserv, Axis Bank, Bajaj Finance, Maruti and SBI were among top laggards today. On the other hand, HCL Tech, Infosys, Nestle India, UltraTech Cement and ITC were top gainers. Sectorally, barring pharma, all the other indices closed in red, with over 3% fall in banking, and around 2% drop in metal, auto and financials.
In line with the equity market, on commodity front, Indian Rupee ended lower at 75.41 per dollar against the last closing of 75.19 per dollar.
On market's near-term indicators, Aamar Deo Singh, Head Advisory, Angel Broking said, "Technically, markets are trading closer to key resistance levels, so profit-booking is being witnessed. Going forward, we could see a rise in INDIA VIX, indicating short-term concerns and fears of the investor community."
Here are 5 factors why domestic equity markets fell today:
1. Weak global cues
Asian markets ended lower today ahead of the release of China's GDP data, scheduled for tomorrow. Traders said investors turned cautious given rising coronavirus cases and percolating tensions between the US and China. US markets closed in red after trading for most of the day in green with good gains.
Benchmarks fell further after negative opening in European markets. Sensex fell 800 points intra day to 35,893 and Nifty declined 232 points to 10,569, with investors losing around Rs 2.4 lakh crore in today's session. Global market trends will continue to dictate the domestic markets in absence of any major domestic event.
2. Inflation data
Investor sentiment weakened after India's June Consumer Price Index (CPI) rose to 6.09% in June, breaching Reserve Bank of India's tolerance band of 6%. The rise in retail inflation was mainly on account of higher prices of food items. Food inflation in June increased 7.87%, according to the CPI data. Wholesale price-based inflation declined 1.81 per cent in June due to a decline in prices of fuel and power, even as food articles remained expensive.
Commenting on the inflation, Deepthi Mary Mathew, Economist at Geojit Financial Services said, "Inflation rate at 6.09 per cent is just above the target fixed by the RBI. Though the inflation rate is above the upper band, RBI would continue with the rate cut cycle, considering the economic damage caused by covid-19."
3. Coronavirus-led fall
Investors got spooked as coronavirus cases continued to rise in US and other parts of the world. Worldwide, the number of COVID-19 cases has crossed 1.30 crore In India, the number of infections spiked to 9.06 lakh.
Vinod Nair, Head of Research at Geojit Financial Services said,"The markets exhibited a high correlation with the global markets and with the virus infections hitting new highs in India, the uncertainty caught up with the markets. Global markets were weak following rising infections in US and US-China tensions being back in the news. Indian markets were also worried about the increasing number of localised lockdowns which would in turn again slowdown the predicted recovery for businesses. "
4. Auto stocks under heavy selling pressure
Auto stocks were under heavy selling pressure today after the industry body SIAM announced sales figures for June. SIAM reported 40% fall in the sale of automobiles in India as a broken supply chain impaired the ability of companies to manufacture cars and two-wheelers. Passenger car segment registered a 58% decline at 55,497 units, while utility vehicles showed a bit more resilience declining 31.2% at 46,201 units. Two-wheelers that account for a majority of automobiles sold in the country in terms of volumes also declined by 38.5% at 10,13,431 units.
Commenting on market's movement, S Ranganathan, Head of Research at LKP Securities said," We witnessed profit booking in key auto stocks as their volume numbers are anyways known to the street for the first quarter".
5. Q1 earnings
Traders said investors were also cautious and turned to profit booking ahead of multiple Q1 results announcements scheduled this week. On the earnings front, while most of the announcements have been made for Q4, investors are awaiting the Q1 business earnings that started with Tata Consultancy Services (TCS) announcing its financial numbers last week. Another IT major Mindtree also reported its Q1 earnings today. Besides Mindtree, Wipro, Century Textiles, Delta Corp, Oberoi Realty, Reliance Industrial Infrastructure among others will also announce their April-June quarter reports later today.
"It is expected that a definitive movement in markets may be visible once India Inc. unveils its Q1 FY21 earnings performance with its first-hand analysis of ground-level reality," said Jimeet Modi, Founder & CEO, SAMCO Securities & StockNote.