After trading in the green for most part of the day, Indian benchmarks witnessed a sudden wave of selling in last hour, which dragged Sensex lower by 839 points and Nifty to 14,478.60 on the downside.
The market opened in the green on the back of the US Fed's comments signalling continuation of low rates regime. However, the market failed to hold altitude and succumbed to profit-booking at higher levels.
At close, Sensex was 585 points, or 1.17 percent, down at 49,216.52 while Nifty was 163 points, or 1.11 percent, down at 14,557.85.
With this, the Indian market extended its losing run into the fifth consecutive session. In these five sessions, Sensex and Nifty have retreated 5 percent.
Here are 4 key factors that weighed down market sentiment:
1. Rising bond yields
A sharp spike in US bond yields triggered a selloff in equities. US 10-year bond yields rose as much as 5 percent to go above 1.7.
"A spike in bond yields has reduced the differential between India’s earning yield and US bond yield which is impacting the FII flows. Currently, rising US bond yields and a sharp spike in crude prices are the major concerns for the market in a short time," Neeraj Chadawar, Head - Quantitative Equity Research, Axis Securities told Moneycontrol.
"The upward shift of yield will present short-term challenges for the market but the structural growth story for India is intact. It remains to see the sustainable direction of the dollar under the scenario of rising yields and crude prices on account of higher inflation expectation," he said.
Deven Choksey of KRChoksey, talking to CNBC-TV18, pointed out that the majority of funds are noticing strong dollar and rising bond yields. "As a result, their allocation of money is either held back or pulled back. Because of this, we are seeing selloff in the market," he said.
2. Surging Covid-19 cases
A spike in Covid-19 cases has raised fresh concerns that it can derail economic revival.
India on Thursday recorded 35,871 new COVID-19 cases, the highest single-day rise in over 100 days, which took the infection tally to 1,14,74,605, according to Union health ministry data.
Registering an increase for the eighth consecutive day, the active caseload reached 2,52,364, which accounts for 2.20 percent of the total infections. The recovery rate further dropped to 96.41 percent, the data updated at 8 am showed. The death toll increased to 1,59,216 with 172 daily new fatalities, it stated.
3. Nifty slips below crucial support of 50-DMA
The Nifty50 slipped below its crucial 50-day moving average, and 50-day exponential moving average (EMA). This is the fifth consecutive day of decline which pushed the index below 14,800.
“Strong support for Nifty below 14,700 seems to be placed in the bullish gap zone of 14,469 – 14,336 levels registered on February 2 in response to the Budget. Contrary to this any stability towards 14,700 levels should lead to a minor bounce which should be curtailed around 14,950 levels,” Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory, Chartviewindia.in told Moneycontrol.
4. Selling in banking, IT, pharma heavyweights
Most banking heavyweights traded in the red, keeping the benchmark indices down as they hold maximum weight in them.
Nifty Bank and Private Bank index fell over a percent each while Nifty PSU Bank index declined almost 2 percent. Nifty IT index fell over 3 percent and Nifty Pharma over 2 percent.
ICICI Bank, Kotak Mahindra Bank, HDFC Bank, Axis Bank, Infosys, TCS, HCL Tech, Tech Mahindra and Dr Reddy's Labs featured among the top drags on Sensex.
"Selling in financials kept markets in the red with broader markets seeing profit booking in IT and pharma stocks ahead of the FTSE rebalancing tomorrow," said S Ranganathan, Head of Research at LKP Securities.
Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
