The market continued to correct for the fourth day in a row on February 18 as the focus shifts from domestic events such as the Budget and December earnings season to global cues along with the economic slowdown.
The benchmark indices recouped more than half of losses in last couple of hours of trade and ended off day's low. The BSE Sensex was down 161.31 points, at 40,894.38, while the Nifty slipped below the key psychological 12,000-mark, down 53.30 points at 11,992.50.
The market breadth was also largely in favour of the bears, as about two shares declined for every share rising on the BSE.
The recovery was also seen in broader markets, as the Nifty Midcap index fell 0.56 percent and Smallcap index declined 0.35 percent.
"As most of the key events are behind us, the Indian markets would take cues from global peers. Further, investors would keep a watch on updates of coronavirus. In the meantime, any correction should be considered as a healthy buying opportunity for investors," Ajit Mishra, VP-Research at Religare Broking said.
Five key factors that dampened investors’ mood:
Global trade has been hit by China's wide spreading novel coronavirus, which has left around 1,900 people dead in the world's second largest economy. The Chinese government on February 17 said there were 72,436 people infected by the virus that is now known as Covid-19.
It is almost a month since China officially announced the outbreak that the infections have been rising.
The outbreak has had a widespread impact on the global economy as China is the biggest consumer and supplier of several commodities, including chemicals, metals, hardware etc. Air travel and tourism have also been hit with several airlines and countries suspending flights to and from China.
Investors are worried about the health f the Chinese as well as the world economy, as a lot of companies and manufacturing units continue to be shut in China since last month. As China is the world’s manufacturing hub, businesses across the world are feeling the pinch of the virus that causes respiratory distress.
Some global brokerage houses have started lowering their growth forecast for China and other Asian economies.
HSBC, which does the maximum business in Asia, said it expects to feel the impact of the coronavirus outbreak in the first quarter and has lowered growth expectations in China for 2020, CNBC reported.
Asian markets traded lower with Japan's Nikkei, Hong Kong's Hang Seng and South Korea's Kospi falling 1.4-1.5 percent, while China's Shanghai Composite closed flat.
The earnings also caused selling pressure as Apple issued revenue warning, saying it was unlikely to meet its quarterly revenue forecast amid lower demand in China and lower iPhone supply globally. HSBC's 2019 earnings also missed expectations.
Moody's lowers growth forecast
The market continued to feel the pressure of the cut in growth forecast by Moody's.
Moody's Investors Service on February 17 cut India’s 2020 Gross Domestic Product (GDP) growth forecast to 5.4 percent from 6.6 percent. It reduced the 2021 GDP growth forecast to 5.8 percent from 6.7 percent.
Weakness across global economy due to the impact of the novel coronavirus outbreak could hurt India’s recovery, Moody's said. Recovery might begin in the current quarter, but it would be slower than expected, it said.
Sectoral indices under pressure
Selling was being seen across sectors, barring IT, with the Nifty Metal falling over 1 percent amid likely weak demand in China, the world's largest consumer of commodities.
PSU Bank index corrected more than 0.8 percent amid worries over exposure to Vodafone Idea after the Supreme Court asked telecom operators to pay adjusted gross revenue (AGR) dues by March 17.
Among others, Nifty Bank, Auto, FMCG and Realty indices were down 0.4-1 percent.
The Nifty formed a bearish candle on daily charts for the fourth consecutive session, trading below the psychological 12,000-mark and also lower than its 50-day moving average.
"11,850 is 61.8 percent Fibonacci retracement support zone and markets are likely to find support near the mentioned zone. Momentum has weakened in the near term and recoveries are likely to be shaky. 12,100 is likely to act as a resistance zone on the way up," Amit Shah, Technical Research Analyst with Indiabulls Ventures told Moneycontrol.
Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory, Chartviewindia.in said in next trading session, traders with high risk appetite can go long if Nifty opens on a bearish note preferably around 11,950 levels but with a stop below 11,900 levels.