Uncertainty grips markets amid second wave of covid

The BSE Sensex slipped or 1.51% to close at 48,440.12, while Nifty fell 1.54% to close at 14,324.90.mint (MINT_PRINT) — The BSE Sensex slipped or 1.51% to close at 48,440.12, while Nifty fell 1.54% to close at 14,324.90.mint **(MINT_PRINT)**

2 min read . Updated: 26 Mar 2021, 12:45 AM IST Nasrin Sultana

In the last two sessions, indices fell over 3% despite rating agencies upgrading outlook

Looming risk of a second wave of covid-19 infections in India and a possible third wave in parts of Europe spooked investors, triggering a sell-off in Indian stocks on Thursday. In the last two trading sessions, benchmark indices fell over 3% despite two rating agencies—S&P Global Ratings and Fitch Ratings—upgrading India’s gross domestic product (GDP) target for FY22 to 11% and 12.8%, respectively.

Analysts said the second wave is less intense than the first and that might provide some respite.

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The BSE Sensex slipped 740.19 points, or 1.51%, to close at 48,440.12 on Thursday. The Nifty fell 224.50 points, or 1.54%, ending the day’s close at 14,324.90.

After a short upmove, the markets may see steep corrections as lockdown fears, hardening bond yields and rising inflation may hit equities, said Deepak Jasani, head of retail research, HDFC Securities. “As foreign institutional investors have started to sell-off in India, its impact can be felt in the mid- and small-cap stocks losing faster in this market," Jasani said. The partial lockdown may not immediately impact March quarter earnings, but June quarter results may bear the brunt if the covid situation worsens, considering that traditionally Q1 is a dull period and companies may not be in a hurry to restart production.

Foreign institutional investors (FIIs), who have been pumping in money into India, were net sellers of domestic shares worth $225.63 million on Tuesday and Wednesday. However, they remain net buyers of shares worth $2.97 billion in March. In 2021, FIIs have bought domestic shares worth $7.96 billion.

“The sudden surge in covid cases has created uncertainty about the pace of economic recovery. The global environment has also turned volatile with movement in bond yields not being orderly. Thus, the sentiments have turned weak. However, such corrective phases are part of any equity market uptrend and we see them as transitionary in nature," said Gaurav Dua, senior vice president, head, capital market strategy, Sharekhan by BNP Paribas.

Dua expects the March quarter results to be encouraging. “Despite the moderation in volume offtake in certain consumer segments and rising costs, we expect a healthy double-digit growth in earnings in Q4 also," he said.

The surge in fresh covid cases is concentrated in Maharashtra, followed by Kerala and Punjab.