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Below are Views on Equity markets opened gap down following spike in global ByMr.Siddhartha Khemka, Head - Retail Research, Motilal Oswal Financial Services Ltd.

Equity markets opened gap down following spike in global bond yields and extended its weakness further as the session progressed. Nifty nosedived 568 points lower (-3.8%) to close at 14,529, while Sensex plunged 1939 points lower (-3.8%) to end at 49,100. However the fall in the broader market was much less severe with Nifty Midcap 100/Nifty Smallcap 100 down -1.6%/-1.2%. All the sectors ended in red with Banks and Financials being the biggest losers – down -4.8%/-4.9%, followed by Infra (-3.6%) and Auto (-3.1%). IT, Media, Metals and Energy lost 2-3% while Realty, Pharma and FMCG were down ~1.8% each.

Global cues were weak as panic in global bond markets led to sharp rise in yields which spooked investors amid fears of interest rate cycle reversal. Overnight, US treasury yields leaped to their highest since the pandemic began, leading to steep fall in global markets. On the domestic side, Nifty slipped as much as 630 points intraday to touch a low of 14,468, while Sensex crashed as much as 2,149 points to hit a low of 48,890. The first day of the March F&O series traded in deep red and the session ended with huge losses of more than 500 points. Bank Nifty was down nearly 5% dragged by Kotak Mahindra Bank, RBL Bank and Axis Bank. The Nifty Financial Services index too was down ~5% weighed by M&M Financial Services, Shriram Transport Finance and HDFC. Rising bond yields, geopolitical tensions and concerns over inflation have piled pressure on the market.

Technically, Nifty formed a strong Bearish candle on daily scale indicating bears had complete grip on the market throughout the day. It formed a Bearish Island Reversal Gap pattern on daily time frame with gap up and gap down near to 15008-15065 zones in last two sessions. Now till it remains below 14650, weakness could be seen towards 14400-14300 zones while on the upside hurdles are seen at 14750-14850 zones. India VIX moved up sharply by 22.95% from 22.89 to 28.14. VIX touched the intraday high of 29.64 and made a highest levels of last 169 trading sessions since 29th June 2020. Surge in VIX has given tight grip to Bears and likely to put pressure on the market at any bounce.

Going ahead the market may continue with its consolidation given weak global cues. Investors would closely track bond yields, geopolitical tensions and inflation data for further market direction and would monitor developments around new US stimulus announcement. Market would also react to the Q3FY21 GDP data on Monday. Even high valuations does not provide much comfort and thus correction was long overdue. Investors should take this opportunity to buy on dips while traders should trade cautiously with stock specific action and book profits in regular intervals.

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