A strong wave of sell-off engulfed the Indian equity market on April 5, dragging benchmarks - Sensex and Nifty - down almost 3 percent each in intraday trade.
The market failed to extend the gains of April 1 and opened in the red amid weak global cues and lurched lower sharply amid heavy losses in bank, financial, auto and realty stocks.
It pared losses later, supported by gains in select IT and metal counters.
Sensex eventually closed 871 points, or 1.74 percent, down at 49,159.32 and Nifty settled with a loss of 230 points, or 1.54 percent, at 14,637.80. BSE Midcap fell 1.13 percent and the Smallcap index 1.08 percent.
Nifty PSU Bank index tanked 4.10 percent while Nifty Bank, private bank, financial services, media and realty indices cracked over 3 percent each. Nifty Auto fell 2.54 percent.
IT and metal bucked the trend as Nifty IT closed 1.97 percent higher while Nifty Metal gained 0.89 percent.
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The market has been volatile in the last few sessions, torn between negatives and positives. While macroeconomic indicators, such as GST collection and auto sales numbers of March, indicate a strong economic rebound, rising COVID-19 cases are posing a serious threat.
"Markets opened gap down following strict guidelines issued in Maharashtra amidst rising coronavirus cases with BFSI and rate sensitives taking a knock ahead of the monetary policy," said S Ranganathan, Head of Research at LKP Securities.
Here are 4 key factors that are keeping the market lower:
1. Surging COVID-19 cases: Rising number of cases in India amid the second wave is keeping investors on tenterhooks. India reported 1,03,558 new COVID-19 cases, 52,847 discharges, and 478 deaths in the last 24 hours, as per the Union Health Ministry.
Many states have announced restrictions on human gatherings and the threat of a complete lockdown looms.
"In India, the fast-rising COVID cases is a cause of concern. Restriction of economic activity in many areas might impact growth recovery," said V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services.
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2. Profit-booking at higher levels: Of late, the trend of profit-booking after a healthy rise has been observed in the market which shows investors are concerned about the valuations of stocks.
"Nifty is trading at a P/B of 4.2, which is close to the post-GFC (global financial crisis) high. The second wave of COVID-19 and high valuation are expected to maintain volatility in the markets in the near term," said Hemant Kanawala, Head – Equity, Kotak Mahindra Life Insurance Company.
As per Vinod Nair, Head of Research at Geojit Financial Services, apart from rising cases of COVID-19, high valuation added further concerns due to a possible downgrade in Q1FY22 earnings.
3. Nifty in a range: Nifty has been trading in the range of 14,650-14,900 for the last few sessions and unless Nifty breaks 14,950 convincingly, the market may continue witnessing such moves, experts believe.
"We are still trading in a restricted range which is between 14,650 and 14,900. Unless we are able to get past 14,950, the index won't propel further. If we manage to do that, the markets could move towards 15,300. On the flip side, if we break 14,500-14,600 on a closing basis, the Nifty can go down further to retest the previous lows of 14,200," said Manish Hathiramani, Proprietary Index Trader and Technical Analyst, Deen Dayal Investments.
4. Earnings, RBI MPC eyed: Investors now await RBI MPC outcome and Q4 earnings to get cues for the market. Experts believe that the market will see some churn in positions in the near term which will keep the market volatile.
"The upcoming Q4FY21 earnings season will begin in a week’s time, so investors’ focus will be shifting back to fundamentals. Revenue growth, margins expansion and management commentary will be key things to watch out for," said Ajit Mishra, VP Research, Religare Broking.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.