A severe spell of selloff hit Dalal Street from the word go on April 19 as flagship indices the Sensex and the Nifty plunged almost 3 percent each within the first 15 minutes of the trade.
Sensex plunged 1,469 points or 3 percent, and Nifty touched 14,191 on the downside in intraday trade.
Eventually, the Sensex closed 883 points, or 1.81 percent, down at 47,949.42. Nifty ended 258 points, or 1.77 percent, down at 14,359.45.
Barring Nifty Pharma, which inched up 0.17 percent, all sectoral indices ended in the red with Nifty PSU Bank and realty indices falling over 4 percent.
Nifty Bank, auto, financial services, media and private bank indices fell over 2 percent each.
BSE Midcap and Smallcap indices closed 1.93 percent and 1.64 percent lower, respectively.
"The market is finding it hard to establish a trend. It is not being able to get past 14,900-15,000 on the upside and neither is it being able to break the 14,200 on a closing basis. If we break 14,200 on a closing basis, we can slide to 13,800-13,900. For the time being, the upside seems to be capped at 15,000," said Manish Hathiramani, Proprietary Index Trader and Technical Analyst, Deen Dayal Investments.
The volatility index India VIX jumped 11 percent, indicating investors are worried about the alarming rise in coronavirus cases in the country. There is fear that the restrictions imposed by state governments will puncture the pace of economic recovery, which is still at a nascent stage.
India reported its highest-ever single-day spike of COVID-19 cases with over 2.73 lakh new cases and 1,619 deaths in the last 24 hours, Union Health Ministry's update on April 19 said.
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The furious rise in COVID-19 cases has compelled several state governments to announce lockdown and strict restrictions that seem to be weighing on market sentiment.
The Centre on April 18 banned the supply of oxygen for industrial purposes except for nine specified industries in view of the shortage of the essential public health commodity in several states.
The decision, which comes into effect from April 22 and will continue until further notice, is likely to hit manufacturers and suppliers though the magnitude of the impact cannot be ascertained at this juncture.
It is not clear how long the current wave will last and if it is close to its peak as states continue to report record infections. Experts, however, are worried that it will hit earnings and economic growth in FY22.
"The health crisis India is going through and localised lockdowns and restrictions on economic activity warrant a market correction. The targets of around 11 percent GDP growth and above 30 percent earnings growth for FY22 that the market had assumed pre-second wave are likely to fall short," VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services, said.
Vijayakumar said the steady rise in positive cases and the decline in the recovery rate were areas of concern but this negativity need not reflect fully in the market since the global clues are positive.
"The sharp recovery in global growth led by the US and China augurs well for markets globally. The decline in US 10-year yield from the recent high of 1.75 percent to 1.56 percent presently is a major relief and support to markets. Bulls would be reluctant to go long; bears would hesitate to go short massively. Time to wait and watch," Vijayakumar said.
BNP Paribas, as reported by CNBC-TV18, said India is not a buy for some time.
"We don't see a buying opportunity for the next one quarter. There are concerns about further lockdowns and the market will have to grapple with uncertainty at the moment. Buying now would feel like catching a falling knife," BNP Paribas said.
"We expect India to underperform Asian peers in the near term. There could be a 10-15 percent correction in the market from its peak levels. Could see new NPAs arise in the banking sector. There is a clear degree of worry as to where to park money at the moment," it said.
The fresh wave of COVID-19 has dimmed India's prospects as a promising market. Foreign portfolio investors (FPIs) have pulled out a net Rs 4,615 crore from Indian markets in April so far. According to the depositories data, overseas investors pulled out Rs 4,643 crore from equities but invested Rs 28 crore in the debt segment.
This translated into a total net withdrawal of Rs 4,615 crore during April 1-16. Previously, FPIs invested Rs 17,304 crore in March, Rs 23,663 crore in February and Rs 14,649 crore in January.
"The absence of flows this month should also be viewed in the context of the $20 billion inflows in the December quarter, which, in fact, was the all-time highest flow to India in any quarter," said S Ranganathan, Head of Research at LKP Securities.
COVID-19 cases will remain the top trigger for the market in the days to come. Unless the numbers begin to fall, the market is expected to remain volatile.
"Earlier we warned our retail customers about the valuation risk in the stock market as we were trading near a higher range of the last 10-year average. We suggest retail investors to keep strike stop loss for their trading and short-term investors to keep their position light and do not overbuy," said Yash Gupta, Equity Research Associate, Angel Broking.
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