Sensex, Nifty wipe out stimulus gains; 5 factors weighing on market

A day after logging 2 percent gains, equity benchmarks the Sensex and the Nifty plunged nearly 3 percent on May 14, mainly on account of profit-booking following weak global cues.

The Sensex wiped out all gains it registered after Prime Minister Narendra Modi announced a stimulus package of Rs 20 lakh crore on May 12.

Sensex plunged 886 points, or 2.77 percent, to 31,122.89, while Nifty cracked 241 points, or 2.57 percent, to 9,142.75.

Here are the 5 factors that weighed on market sentiment:

Clarity on stimulus

Even as Finance Minister Nirmala Sitharaman on May 13 shared the details of the first tranche of Rs 20 lakh crore relief package, investors are looking for more clarity before assessing the impact of the stimulus on the economy and the market.

Top global brokerages believe the move is positive but the implementation of these measures will be vital to improving the flow of credit.

The FM will at 4 pm on May 14 share more details of the stimulus, which is said to be around 10 percent of India’s GDP.

“The comprehensive range of announcements made by the Finance Minister under Aatma Nirbhar package, yesterday, focused on MSME sector, easing of credit flow and liquidity in the financial system, lending a helping hand to industry, kick start production, protect jobs and increase funds' disposal at the hands of the common man,” said Aamar Deo Singh, Head Advisory, Angel Broking.

"However, more is expected today too, with the focus now shifting towards agriculture, which employs more than 50 percent of the workforce and also, retail traders which form a sizeable chunk. Apart from this, any steps taken to alleviate the sufferings of both industry and masses is more than welcome."

Rising COVID-19 cases

India’s count of confirmed coronavirus cases has risen to 78,003. The rise in infections despite an almost two-month lockdown has investors worried over with fears of a huge economic fallout.

Sharp losses in financial heavyweights

The Nifty Bank and financial service indices plunged 3 percent on account of sharp losses in heavyweights such as HDFC, HDFC Bank, ICICI Bank, ICICI Lombard General Insurance Company and HDFC Life.

The measures announced by the FM are likely to benefit PSU banks and large private sector banks and NBFCs won’t gain much, so the situation remains unfavourable for them, experts say.

Lockdown 4.0 coming

In his address to the nation on May 12, the Prime Minister talked about lockdown 4.0, which he said would have new rules and relaxations.

While there is no clarity on the new phase, which will begin on May 18, the market is worried that the extended lockdown will hit the already battered economy even harder, marring even prospects of FY22.

All economic indicators are flashing warning signs and unless the economy restarts, the outlook will remain hazy and the market will continue to react to the macroeconomic reality of the country.

Weak global cues

Most Asian markets clocked losses on May 14, in sync with Wall Street after the US Fed Chairman warned of an extended weak economic growth.