Experts see the momentum to slow down as we head towards the holiday season. Indian market will remain shut on Friday on account of Christmas on 25 December, Friday.
The new strain of coronavirus discovered in UK triggered a decline in the market. A correction was on the cards anyway and it was just a matter of time as indices had rallied for seven consecutive weeks.
Experts see the momentum slowing down further as we approach the holiday season, and the Indian market could possibly see a 5 percent downtick in the near term.
It was Manic Monday on D-Street after reports of a new Coronavirus strain was found in Britain. The reports further suggest that the new strain of the virus is estimated to be 70% more infectious which triggered a sharp sell-off in markets across the globe.
The S&P BSE Sensex which climbed Mount 47K and Nifty50 closed above 13700 for the week ended December 18 faced with intense selling pressure on Monday that pushed the benchmark indices below crucial support levels.
Indian market witnessed its worst single-day fall in seven months which wiped out around Rs 7 lakh cr in terms of market capitalization on the BSE.
“The market fall today can be attributed to the surge in cases in the UK and the new strain of coronavirus which transmits even faster. Also, technical factors like put writers covering their positions by shorting in the futures market, lead to the fast decline in the market,” Naveen Kulkarni, Chief Investment Officer, Axis Securities told Moneycontrol.
“However, the macro set for India is still positive as economic activities are picking up and liquidity continues to be strong. Passage of stimulus in the US will provide downside protection to the equity markets,” he said.
Kulkarni further added that the markets could correct further by another 5%, but that will provide opportunities to build a long term position in the market. So, this correction is more likely a pause in the long term construct of the market.
The likely approval of the $900 bn stimulus will provide a cushion to the equity markets across the globe but much of the positive news is already in the price.
Foreign institutional investors (FIIs) which have poured in more than Rs 38,000 crore in the Indian equity markets pulled out Rs 300 crore on Monday. Experts see the momentum to slow down as we head towards the holiday season. Indian market will remain shut on Friday on account of Christmas on 25 December, Friday.
“Fresh concerns over the spread of coronavirus in UK and Europe dragged the Indian market that lost over 3 percent on Monday. The new strain of coronavirus in the UK has led to correction across European markets,” Jaideep Hansraj, MD & CEO, Kotak Securities told Moneycontrol.
“Parts of Asia like Hong Kong is also considering measures such as curfews and shutdowns to tame the virus. As we head towards Christmas vacation and calendar year-end, FII flows are expected to moderate which could also be one of the cause of steep correction,” he said.
Hansraj further added that lack of positive news flows has seen the Indian market taking a breather because after all, it has been a non-stop rally for the past 50-Days which started after the US elections.
The Nifty was down 432.10 points to close 3.14 percent lower at 13328.40. Indian markets perform the worst among the Asia pack.
Volumes on the NSE were the highest since Nov 27. All sectoral indices ended in the negative with PSU Bank, Media, Metals realty, Auto, Banks, and Pharma indices being loss leaders. Broad market indices line Midcap and Smallcap fell more than the Nifty.
“India's equity benchmark indices fell the hardest in seven months on Dec 21 as resurgent fears over a new strain of Covid-19 virus found in the UK spread panic across the globe. Basket selling by FPIs likely triggered the sharp fall in Indian markets,” Deepak Jasani, Head of Retail Research, HDFC Securities told Moneycontrol.
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