Bears continued dominating the equity market as key equity indices Sensex and Nifty ended with deep cuts on September 24, extending the losing streak into the sixth consecutive session.
Markets remained in the red from the word go as sentiment remained fragile on concerns over rising COVID-19 cases and uncertainty over economic recovery.
Sensex plunged 1,172 points while Nifty fell to 10,790 in intraday trade.
Eventually, Sensex closed 1,115 points, or 2.96 percent, down at 36,553.60 and Nifty finished 326 points, or 2.93 percent, down at 10,805.55.
BSE Midcap and Smallcap indices closed 2.14 percent and 2.28 percent, lower, respectively.
Among the sectoral indices, BSE IT (down 4.45 percent) and Teck (down 4.25 percent) lost the most, followed by Realty, Metal, Bankex and Auto, falling over 3 percent each.
"Markets tracked weak global cues as the uncertainty witnessed in the last few days gave way to negativity. The uncertainty regarding an economic recovery, the unabated rise in virus infections, and today being derivatives expiry day, all contributed to the negativity. With volatility expected to be high, traders are advised to remain cautious," said Vinod Nair, Head of Research at Geojit Financial Services.
Here are the 5 factors that fuelled the sell-off in the market:
Weak global cues
Indian markets traded in sync with global cues. Shanghai Composite Index and Kospi fell about 2 percent while Nikkei fell 1 percent.
Asian stocks opened lower on Thursday, tracking a sharply lower Wall Street session amid fresh concerns that the global economic recovery is running out of steam.
US stocks fell sharply after data showed business activity cooled off while uncertainty over fiscal stimulus raised concerns about the economy.
Surge in COVID cases
India has been consistently reporting the world’s highest daily COVID-19 infection cases.
So far, India has recorded 57,32,518 confirmed COVID-19 cases, including 91,149 deaths. Maharashtra, Andhra Pradesh and Tamil Nadu have reported the highest number of cases.
As per a report by Reuters, India’s coronavirus infections surged again on Wednesday, a day after falling to their lowest figure in almost a month.
Uncertainty over economic recovery
The uncertainty over economic recovery is weighing on investor sentiment. While many rating agencies have projected India's growth to remain negative in FY21, the ambiguity over the extent of the fall is raising nervousness.
As per aBusiness Standard report, the finance ministry is not sure about its earlier estimates of a V-shaped economic recovery as people are spending less owing to extreme uncertainty induced by the pandemic.
F&O expiry
Today is the last day of the September series of futures and options contracts and the market is witnessing sector and stock-specific volatility due to rollover of positions.
Experts are of the view that Thursday could be a volatile day amid September F&O expiry, and in case the index gets support from the financial space then there could be a possibility of a further bounce towards 11,300-11,400 levels.
Technical factors
The Nifty index formed a Bearish Belt Hold candle in the previous session.
For Thursday, crucial support is placed at 11,000-10,950, while resistance levels are placed in the range of 11250-11300 levels, suggest experts.
“On the higher side, 11,200 and 11,250 would be a major hurdle for the market. Recently, we saw a downtrend in the market mainly because of Financials. In case financial stocks start bouncing then the Nifty could even cross the level of 11300 and may rally to 11,450/11,500 levels,” Shrikant Chouhan, Executive Vice President, Equity Technical Research at Kotak Securities told Moneycontrol.
“On Thursday, one needs to keep a close watch on the Bank Nifty as it has formed a perfect bullish hammer pattern after hitting the oversold level and it could turn the sentiment bullish above the level of 21500,” he said.
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