Below the Daily Market Commentary By Mr. Siddhartha Khemka, Head - Retail Research, Motilal Oswal Financial Services Ltd
Equity markets witnessed sudden fall in the afternoon session, thus extending their decline into fourth straight day. Nifty/Sensex plunged 137/435 points (-0.9% each) to close at 14,982/50,890. The broader market too ended in red with Nifty Midcap 100/ Nifty Smallcap 100 down -1.6%/-0.9%. All the sectors ended in red with PSU Banks being the biggest loser – down -4.8%, followed by Auto (-2.7%). Private Banks, Financials, Metals, Pharma, Realty and Infra too fell more than 1%.
Global cues were weak as higher longer-dated bond yields and underwhelming US data dented investor confidence in a faster economic recovery from the COVID-19 pandemic, while gold hit a seven-month trough. On the domestic side, Nifty witnessed broad based profit booking today, and slipped below the crucial 15,000 level mark. It had hit new record highs earlier this week, as equities saw healthy inflows since the announcement of the Budget. However, high valuations and fresh concerns over the increase in the number of infected COVID-19 cases led to profit booking. ONGC, Hero MotoCorp, Tata Steel, SBI and Tata Motors were among the major losers on the Nifty, while the gainers were UPL, IndusInd Bank, Dr Reddy’s Labs, GAIL and HUL.
Technically, Nifty formed a Bearish candle on daily scale and a Bearish Engulfing candle on weekly scale. It continues its formation of lower highs - lower lows of the last three trading sessions. Now, till it remains below 15150, weakness could continue towards next key support of 14800-14700 while on the upside hurdles are seen at 15250-15400.
Going ahead the market may continue with its consolidation for some time till the concerns over rising bond yields and inflation recedes. Even spike in virus cases is worrying the market. Further Nifty valuations at ~21x FY22 EPS are not inexpensive anymore and demand consistent earnings delivery ahead. Rising bond yields may cap equity valuations as the RBI may have to do a balancing act to keep bond yields at lower levels while managing the government borrowing program. Thus the market would track rising inflation, increasing covid cases along with prospective US stimulus in the near term for further direction.
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