Domestic benchmarks Sensex and Nifty ended with deep losses, ending almost 3% lower on Thursday, the expiry day for September futures & options contracts, backed by heavy selloff in global equities. Extending fall for the sixth consecutive session, the BSE 30-share benchmark Sensex ended 1,114 points lower at 36,553 and NSE Nifty 50 crashed 326 points to 10,805.
Here's what dragged markets lower:
1- F&O expiry
Amid the expiry of September futures & options contracts today, all sectors traded with high volatility and ended deep in red, with 4.2% fall registered in IT and Metal, followed by almost 2% drop in other sectors.
Tracking massive sell-off in global stocks amid heavy foreign fund outflows, all Sensex components were in the red with M&M, Bajaj Finance, IndusInd Bank, Maruti, Axis Bank, Bajaj Finserv and ICICI Bank shedding up to 33%.
S Ranganathan, Head of Research at LKP Securities said,"Indices here saw deep cuts led by TCS & Infosys as both along with RIL were the ones which led the recovery in the last five months. The broader markets were pounded today much beyond the 3% cut witnessed in the indices".
2-Continued crash in global markets
Asian stocks closed lower on Thursday following overnight declines on Wall Street as investors fretted over uncertainty around the coronavirus pandemic and further stimulus. Expect SGX Nifty on the Singapore Exchange, bourses in Shanghai, Hong Kong, Seoul as well as Tokyo ended with over 1% losses. Uncertainty witnessed in the last few days gave way to negativity, with broader markets also underperforming.
Ruchit Jain (Senior Analyst - Technical and Derivatives, Angel Broking said," The negative global cues weighed down heavily on our markets today as the Nifty opened gap down and then corrected throughout the day to end with a loss of almost 3 percent."
3- Lockdown fears in Europe
Amid concerns over fresh rounds of coronavirus-induced lockdowns across Europe and Britain, currency, commodity as well as equity markets have continued to decline. European governments imposing tougher restrictions on businesses to slow the spread of the coronavirus also made markets bearish.
Slowdown in general economic activities in Europe due to rising virus infections kept market sentiments pessimistic. European markets opened with deep cuts as investors reacted to key data coming out of euro zone weighing the chance of more stimuli.
S Ranganathan said," Weak global cues coupled with worrying data points from the US led to a gap down start today even as the re-emergence of the virus rattled the Euro Zone."
On market crash today from Abhimanyu Sofat, Head of Research, IIFL Securities said, "It is possible that we may see more correction. Scotland and UK have said they are contemplating a lockdown. Fears that more economies may close down is creating more nervousness in the market."
4-Delay in Financial aid
Over uncertainty of the next stimulus package by the US government, all three US indices ended in red. In futures, DOW Jones traded down by 525 points (down 1.92%) and NASDAQ was down by 330 points (down 3.02%).
Delayed action from the US Federal Reserve and Congress to help the US economy with an additional stimulus package also made participants less optimistic. Taking cues from overnight sell off in US markets, both Asian and European markets traded lower today.
"The revelations on global bank's transactions also weighed heavily. All this is collective bothering the market, which is on the lookout for reasons to correct. Market had already raced ahead of its valuations," Abhimanyu Sofat added.
Ajit Mishra, VP - Research, Religare Broking said,"The looming uncertainty over the stimulus package in the US combined with the issue of rising COVID cases worldwide has raised concerns over the economic recovery. And, it may deteriorate further if the virus situation results in partial lockdown."
5-Sell off in IT stocks
IT stocks led negative momentum in the global markets as re-emergence of virus infections around the world put doubts on the global economic recovery.
US markets closed lower with big cuts led by selloff in technology stocks on the back of divides over additional pandemic aid and rising coronavirus cases in US and Europe.
Overseas, big tech stocks fell from worries over the pandemic and politics. Despite higher dollar index, IT stocks tumbled in domestic as well as international markets on news of increasing chances of countries excercising lockdowns.
6-Weak Technicals
On the technical front, supports placed at around 11,018 and then at 10900-10950 levels were crossed during the session, with Nifty ending at 10,800 today.
India VIX, the measure of fear and volatility in the market, spiked 2.59% to 12.32 reflecting the expectation of volatile moves going ahead.
In this week, Sensex and Nity have fallen by 2,426 points or 6.2% and 710 points or 6.17%, respectively. Yesterday, Sensex ended 65 points lower at 37,668 and Nifty declined 21 points to 11,131.
Ajit Mishra, VP - Research, Religare Broking said,"Nifty is down by nearly 6% this week so far and tested the crucial level of 10,800 too however there's no sign of respite from the banking index."
Sameet Chavan (Chief Analyst-Technical and Derivatives, Angel Broking said," We have been cautious on the market recently and our strategy to remain light on trading positions has played out well so far. Now, the index is near to its immediate support zone of 11000-10950. On the flipside, 11250-11300 remains an immediate resistance zone. The index could consolidate within this range in next couple sessions and we could also see some swings within the range on the expiry day."
7-Rise in Coronavirus cases
Worries about the sluggish pace of economic recovery due to the spread of pandemic worldwide has again turned investors pessimistic.
Vinod Nair, Head of Research at Geojit Financial Services said," The uncertainty regarding an economic recovery, the unabated rise in virus infections, and today being derivatives expiry day, all contributed to the negativity."
Worldwide, there were 321 lakh confirmed cases and 9.82 lakh deaths from COVID-19 outbreak. India's COVID-19 caseload breached the 57-lakh mark and the death toll from COVID-19 infections rose to 0.91 lakh, while over 46 lakh people recovered from the disease.
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