Benchmark indices ended sharply lower on Wednesday led by high selling pressure in banks and financials, following weak global cues. Erasing gains of last 2 days, Sensex ended 599 points lower at 39,922 and Nifty fell 159 points to 11,729. Yesterday, Sensex closed 376 points higher at 40,522 and Nifty gained 121 points to 11,889. Global equities were negative today as worries about a surge in coronavirus cases and dwindling hopes for a US stimulus package caused worries across global markets.
Bharti Airtel, M&M, Maruti, Bajaj Finance, Bajaj Finserv, NTPC, Axis Bank and Infosys were also among the gainers. Kotak Bank, followed by HDFC, HUL, ICICI Bank and Titan were among the top losers. India VIX, the volatility index, rose almost 5 per cent to 23.2 levels.
On the currency front, Indian rupee ended lower by 16 paise at 73.87, amid selling seen in the domestic equity market, against Tuesday's close of 73.71.
Here are 5 key factors that weighed on the benchmark indices today:
1. Delay in US stimulus package
US stocks finished mostly lower on Tuesday as investors lost hopes on the US fiscal stimulus, ahead of the key US presidential elections on November 3, 2020. Lawmakers abandoned efforts to reach an agreement on a new round of fiscal spending. Senate Majority Leader Mitch McConnell adjourned the Senate until November 9, further diminishing the prospects of a deal being reached before the election.
Uncertainty over next week's US elections also added to investors' concerns.
2. Rising coronavirus cases
Globally equities were deep in red today amid lingering concerns about the impact of the worsening Covid-19 cases in some parts of the world, igniting fears of strict lockdown measures that could damage already fragile economic recoveries.
Wall Street closed lower yesterday as traders weighed a recent uptick in coronavirus infections. European indices opened 3% lower each, as governments enforced new lockdowns to curb the COVID-19 outbreak.
Surging coronavirus cases in the United States and Europe raised concerns about more damage to weakened economies. Worldwide, there were 442 lakh confirmed cases and 11.71 lakh deaths from COVID-19 outbreak. India's COVID-19 caseload breached the 79-lakh mark and the death toll from COVID-19 infections rose to 1.20 lakh.
Keshav Lahoti-Associate Equity Analyst, Angel Broking said," Global cues were quite negative: Dow Futures, Nasdaq Futures and FTSE were down by 1.6%, 1.0% and 1.4% respectively. We expect volatility to continue in the market on the eye of key events of the US election, ongoing result season and how coronavirus cases are spanning around the world."
3. Sector-based selling
Sectoral indices too succumbed to the overall weakness of the broader market as selling was witnessed across-the-board with financial and banking stocks leading the crash.
Indian stocks traded higher in the pre-opening session on Wednesday. However, equity indices turned red as the second wave of coronavirus around the world forced investors to book profits. All sectors ended in red territory, with banking, realty and financial services closing 2% lower. Meanwhile, PSU, media and PSU banks were down 1.5% each.
S Ranganathan, Head of Research at LKP securities said,"Benchmark Indices were dragged lower by 1.4% in today's trade led by Financials & Metals. Broader Markets too succumbed to the selling pressure in pockets like Auto Parts where several companies have a presence in the EU."
4. Q2 Earnings
There was buying pressure seen in the latter half in IT and banking stocks today, amid uncertainty over the Q2 earnings.
September quarterly earnings announcements by Axis Bank, Larsen & Toubro, Titan Company, Dr Reddy's Labs, Hero MotoCorp, Marico, PI Industries, GSK Pharma and ICICI Securities also kept the tone for the stock market negative today.
Vinod Nair, Head Of Research at Geojit Financial Services said," Indian markets had started the week on a strong note due to the announcement of overwhelming Q2 result and in anticipation of increased FII inflows due increase in India's weightage in MSCI index."
5. Technical outlook
On closing today, Manish Hathiramani, proprietary index trader and technical analyst, Deen Dayal Investments said, "We broke the levels of 11700 and briefly visited 11684 which is around the lower end of the range but we bounced back to close above 11700. These are crucial times for trading as a break of 11650 could trigger a fresh wave of shorts which could take the markets down to 11400-11450."
Shrikant Chouhan, Executive Vice President (Equity Technical Research) Kotak Securities said," Nifty has overruled the possibility of the triangle consolidation by breaking the low of 11700. It would now follow the Zigzag corrective pattern, in which it could hit the level of 11600 or 11550 levels. On a daily basis, Nifty also closed below the support of 20 days SMA, which is an indication of further weakness. The 50 days SMA is also placed at 11540 levels. While on the upside side, 11800 and 11830 would act as a major hurdle for the market.
Ajit Mishra, VP - Research, Religare Broking said, "Rising Covid-19 cases globally specifically in Europe and US are worrying investors as strict lockdown could be imposed and economy recovery which is still at nascent stage could once again get hit. Further, no stimulus announcement, as well as elections in the US too, are keeping investors on edge. The scheduled derivative expiry of October month contracts will further add to the volatility. We reiterate our cautious view on markets and suggest continuing with stock-specific trading approach."
Aamar Deo Singh-Head Advisory, Angel Broking said," Going forward, Nifty has crucial support around the 11600-11650 zone whereas resistance is seen around 11850-11900. Volatility is being witnessed ahead of the monthly FNO Expiry tomorrow."