Domestic equity benchmarks - Sensex and Nifty - slipped into bearish territory on Monday and ended over 1.6% lower each, tracking weak Asian peers and selling in index heavyweights. Extending decline for the fourth straight session, S&P BSE Sensex ended 667 points lower at 36,939 and NSE Nifty 50 fell 173 points to 10,899. Where the 30-share Sensex has declined by 1,552 points in the last four sessions, Nifty 50 has fallen 401 points. In the last one month, Sensex and Nifty have gained 2.5% and 2.68%, respectively.
Traders said foreign fund outflows, muted global equities and rising COVID-19 cases dragged the local equity market down. Sectorally, gains in metal, pharma and PSU banks were capped by losses in banking and financials that dropped over 2% each and media and real estate that ended 1.5% lower each. Kotak Bank, followed by IndusInd Bank, HDFC Bank, ONGC, PowerGrid, Axis Bank, Sun Pharma and Reliance Industries (RIL) were among the top losers today, while Bajaj Auto, Titan, Maruti, M&M and SBI were among the gainers.
Here are top 5 reasons for today's decline:
Weak global cues
Asian share markets were trading mostly lower on Monday as US lawmakers struggled to hammer out a new stimulus plan amid the global surge in coronavirus cases. Traders said markets will continue taking cues from the worldwide trend.
Overseas, markets were also jittery on the back of US-China tensions. This followed after reports that suggested Microsoft is in advanced talks to buy the US operations of TikTok, which is owned by the Chinese company ByteDance. This was seen as a source of national security and censorship concerns by the Trump administration that added to the escalated tensions between the world's two largest economies. Globally, traders will also keep a track on macroeconomic data by the US
The relentless surge in domestic coronavirus cases, as well as worldwide, also added to investor worries. With home minister Amit Shah testing COVID-19 positive during the weekend, analysts were expecting the market to decline at the opening session today.
In India, coronavirus cases neared 18.05 lakh with total deaths standing at 38,176. Worldwide, there are 182 lakh confirmed cases and 6.9 lakh deaths from the coronavirus outbreak.
Selling in banks ahead of RBI policy
Banking stocks led Monday's fall and slid amid mixed expectations for an upcoming interest rate decision. Experts are, however, divided over the possibility of another rate cut by the Reserve Bank of India (RBI) in its forthcoming policy. Traders said investors are not fully convinced that the central bank will cut rates this week and have taken a cautious stance on the same. The RBI would announce its rate decision on coming Thursday after its three days meet beginning August 4.
Stock specific action
Investor sentiments further remained fragile amid the start of a poor Q1 earnings season with weak results from key heavyweights, indicating significant financial damage from the impact of the coronavirus outbreak. Auto stocks, that were rising in early trade, gave up initial momentum by the later half. Meanwhile, stock specific action was registered in index heavyweights such as Reliance.
Commenting on today's bearish rally, S Ranganathan, Head of Research at LKP Securities said, "Market opened weak today and ended weaker as heavyweights and financials bore the brunt of profit booking as the supply of paper starting this month weighed in the minds of investors. Pharmaceuticals, however, stood out today also as several API players were sought after by investors and were seen buzzing around throughout the day."
As per technical indicators, psychological support point-11,000 mark has been broken with Nifty closing below the same. In case of breakdown, the index will find next support around its 200-day SMA, which is now placed at around 10,860 level, said Reliance Smart Money today. For the week ahead, investors will keep an eye on RBI policy, macro data, US-China tensions and coronavirus cases which will set trends for the benchmark indices.
On Nifty's outlook, Jimeet Modi, Founder & CEO Samco Group said, "Selling pressure in Nifty50 at higher levels and weakness in Bank Nifty is likely to drag the benchmark indices lower. We maintain a bearish outlook going ahead and believe a retest of 10600 is a possibility within a couple of weeks."
Commenting on Nifty's near term outlook, Rohit Singre, Senior Technical Analyst at LKP Securities said, "Index again retraced below 11 k mark hinting if continued to trade below 11k mark. We may see some more cuts towards the immediate support zone of 10,800-10,730 zone and resistance is coming near 1,0950-11,000 zone. Strength will be back only above 11k mark." On Nifty Bank, he added, "Nifty bank closed the day at 21,072 with loss of nearly 3%. The index closed a day near the crucial support zone of the 21k mark. Any break below the 21k mark can see more pressure towards the 20,500 zone and resistance is coming near 21,350-21,700 zone."