Wiping out the gains in the last six sessions, domestic stock markets on Thursday fell 2.6 per cent as expectations of a big fiscal stimulus in India, the US and Europe did not materialize and the second wave of Covid-19 infection led to strict restriction and lockdown in Europe. The Sensex plunged 1,066 points to 39,728.41 and the NSE Nifty Index declined 291 points to 11,680.35.
“The market had moved up on expectations of a big stimulus, but the desired fiscal package was not announced in India and a delay of stimulus in the US and Euro has changed the trend. At the same time, the pace of economic recovery is under stress because of a resurgence of high rates of Covid infection, mounting to high economic restrictions,” Vinod Nair, head of research, Geojit Financial Services, said.
“The margin of safety is low given premium prices and slowdown in economic recovery. The trend going forward will depend on the supportive measures announced in context to stimulus and commentary of Q2 results,” Nair said. “In India, we additionally had reports of a MFI defaulting on debt servicing due to internal fraud and a financial service firm facing forensic audit directed by the regulator.”
Ajit Mishra, VP—research, Religare Broking, said, “Markets witnessed a sharp sell-off in today’s session following global peers. Investor sentiment was largely impacted as US fiscal stimulus would get delayed until elections. Also, the second wave of Covid-19 infection led to strict restriction and lockdown globally majorly in Europe added to woes.”
On the domestic front, the benchmark indices opened flat and gradually inched lower in the first half. However, decline in IT, banking and energy majors intensified the fall as the session progressed.
“Weakness in the European markets led to a fresh bout of selling in our markets post 1300 Hrs. European stocks slumped Thursday, with investors concerned about the impact of a second wave of coronavirus on the economy without any imminent stimulus to cushion the blow. Stalled vaccine trials and Brexit clouds also played a part in the sentiments weakening,” said Deepak Jasani, head of retail Research, HDFC Securities.
Meanwhile, the rupee on Thursday settled 5 paise lower at 73.36 to the US dollar as weaker Asian peers and fund outflows from domestic markets weighed on investor sentiment. Additionally, importers’ mid-month dollar demand also put pressure on the local unit, analysts said.
At the interbank forex market, the rupee opened on a steady note but was caught in volatility as the trade progressed.
During the session, it hit an intra-day high of 73.22 and a low of 73.41 against the US dollar. It finally closed at 73.36, lower by 5 paise over its previous close of 73.31.
Foreign institutional investors turned net sellers in the capital market as they offloaded shares worth Rs 604.07 crore on Thursday, exchange data showed.
The dollar index, which gauges the greenback’s strength against a basket of six currencies, rose 0.34 per cent to 93.69.
Asian currencies were weak amid the sour risk tone as the dollar index inched higher and weighed on sentiments, an analyst noted. IT and banking stocks, which were outperformers of the rally seen in the last 10 trading sessions, led the decline. Further, Moody’s statement that India’s second round of stimulus will provide very limited support to growth during these times dampened the sentiment. The broader market also fell in tandem with Nifty Midcap and Nifty Small Cap 100 down 1.7 per cent each. All the sectors ended in the red with banks (-3.4 per cent), financials (-3.0 per cent) and IT (-2.9 per cent) remaining the top losers.
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