On Monday Indian stock markets fell sharply with benchmark index Sensex plunging over 1,000 points and Nifty dropping below 14,700 levels. Equities in India rose sharply in the first two weeks of February, driven by solid corporate earnings, a Budget and strong foreign fund inflows.
But profit-taking has been seen in recent sessions as some investors locked in profits in recent winners on concerns that valuations are getting stretched. Just three stocks – ONGC, HDFC Bank and Kotak Bank – among the 30 Sensex stocks were trading in the green.
L&T, IndusInd Bank, Axis Bank, Dr Reddy’s, Tech Mahindra and M&M were down between 3% and 4.5%. Analysts say that rising US bond yields has spooked investors who fear that money might move away from emerging markets.
Back home, rising covid cases in Maharashtra has also dented sentiment. Maharashtra has ordered fresh restrictions on people’s movement and imposed night curfews in some cities, though not in the financial capital Mumbai.
The state has reported nearly 7,000 new cases in past 24 hours, a steep rise from just 2,000 cases earlier this month. Latest figures given by the health ministry on Monday, showed India reported 14,199 new infections, and 83 new deaths on Sunday.
“US President Joe Biden’s push for a $1.9 trillion Covid-19 relief plan took a move ahead when the US House of Representatives Committee released bills that Democrats expect to enact by next week. The hope of improvement in US economy has triggered the global fund to reallocate their portfolio weightage back to the US by reducing the exposure in the overstretched emerging market. This led to profit booking, and we witnessed the market break below the critical level of 14750,” said Ashis Biswas, Head of Technical Research at CapitalVia Global Research.
“However, we believe that 14500-14300 will attract demand in the market and the recent down leg is likely to arrest around the level of 14500-14300.” Other global markets mostly were lower today as falling infection rates and more good news on the vaccine front were overshadowed by growing worries about high valuations and inflation.
The India VIX index, commonly know as fear gauge, surged 14% to 25.36, indicating nervousness among investors. Meanwhile, Goldman Sachs has raised by $10 its Brent crude oil price forecasts for the second and third quarters of 2021, citing lower expected inventories, higher marginal costs to restart upstream activity and speculative inflows.