Four Key Factors That Are Keeping The Market Lower
On April 5, a strong wave of sell-off engulfed Indian equity market, dragging benchmarks - Sensex and Nifty - down almost 3 percent each in the morning trade.
The market opened in red amid weak global cues with heavy losses in bank, financial, auto and realty stocks. Nifty PSU Bank index tanked about 5 percent while Nifty Bank, private bank, financial services, auto, media and realty indices cracked up to 4 percent each.
BSE Midcap and Smallcap indices also fell two percent each. The rising COVID-19 cases are posing a serious threat.
Here are 4 key factors that are keeping the market lower:
1. Surging COVID-19 cases: Rising number of cases in India amid second wave is keeping investors on tenterhooks. India reported 1,03,558 new COVID-19 cases, 52,847 discharges, and 478 deaths in the last 24 hours, as per the Union Health Ministry.
Many states have announced restrictions on human gatherings and the threat of a complete lockdown looms.
"In India, the fast-rising COVID cases is a cause of concern. Restriction of economic activity in many areas might impact growth recovery," said V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services.
2. Profit-booking at higher levels: Of late, the trend of profit-booking after a healthy rise has been observed in the market which shows investors are concerned about the valuations of stocks.
"Nifty is trading at a P/B of 4.2, which is close to the post-GFC (global financial crisis) high. The second wave of COVID-19 and high valuation are expected to maintain volatility in the markets in the near term," said Hemant Kanawala, Head – Equity, Kotak Mahindra Life Insurance Company.
3. Nifty in a range: Nifty has been trading in the range of 14,650-14,900 for the last few sessions and unless Nifty breaks 14,950 convincingly, the market may continue witnessing such moves, experts believe.
"We are still trading in a restricted range which is between 14,650 and 14,900. Unless we are able to get past 14,950, the index won't propel further. If we manage to do that, the markets could move towards 15,300. On the flip side, if we break 14,500-14,600 on a closing basis, the Nifty can go down further to retest the previous lows of 14,200," said Manish Hathiramani, Proprietary Index Trader and Technical Analyst, Deen Dayal Investments.
4. Earnings, RBI MPC eyed: Investors now await RBI MPC outcome and Q4 earnings to get cues for the market. Experts believe that the market will see some churn in positions in the near term which will keep the market volatile.
"The upcoming Q4FY21 earnings season will begin in a week’s time, so investors’ focus will be shifting back to fundamentals. Revenue growth, margins expansion and management commentary will be key things to watch out for," said Ajit Mishra, VP Research, Religare Broking.