Monday Mayhem: 4 Factors That Dragged Sensex Lower By 1470 Pts
Amid intensifying corona situation in the country, markets too tumbled by a huge 1470 points on the Sensex in comparison to previous close. Among the most hit are the financials and PSU Bank stocks. In the morning trade, there was some seen some resilience in pharma stocks, but at the time of writing this report they too traded weak with mild weakness. Broader markets however pared sharp morning losses.
"The steady rise in test positivity cases and the steady decline in recovery rates are areas of serious concern. But, this negativity need not reflect fully in the market since the global clues are positive. The decline in US 10-year yield from the recent high of 1.75 per cent to 1.56 per cent presently is a major relief & support to markets," said Dr. V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services.
Factors dragging indices down:
Coronavirus situation;
The second wave is worse than the first and the recovery rate is also declining which is weighing on the street. Though previously experts suggested that amid vaccination drive, markets shall not be impacted much by the pandemic this time.
Earnings growth:
As there were expectations that earnings shall remain strong in FY21 and FY22, markets have maintained linear trajectory and any negative news will derail the economic growth. "The health crisis India is going through and localised lockdowns and restrictions on economic activity warrant a market correction. The targets of around 11 per cent GDP growth and above 30 per cent earnings growth for FY 22 that the market had assumed pre-second wave are likely to fall short," cautioned Kumar.
FPI Outflows:
There has been strong outflow from the FPI who have pulled aggressively in the month of April. And in a case they become net sellers then it shall be the first monthly sell-off by them since September month.
GDP downgrades
Brokerages have reduced their GDP forecast for the ongoing fiscal year to as low as 10 percent and this weighs on market sentiment.
| Brokerage | Revised GDP forecast for FY22 | Previous forecast for FY22 |
|---|---|---|
| Nomura | 12.60% | 13.50% |
| JP Morgan | 11.00% | 13.00% |
| UBS | 10.00% | 11.50% |
| CIti | 12.00% |