Below is the View On Daily Market Commentary by Mr. Siddhartha Khemka, Head - Retail Research, Motilal Oswal Financial Services Ltd
“Indian equity markets ended in marginal red amidst a highly volatile session. Banks and Financial Services dragged the market down after RBI cut the policy rates and extended loan moratorium period by 3 more months. Nifty50 fell 67 points to close at 9039 level (-0.7%) while Sensex ended 260 points lower to close at 30,673 level (-0.8%). The overall market breadth was also negative with Nifty Midcap 100/Nifty Smallcap 100 down 0.7%/0.6%. Sectorally it was a mixed bag with Banks and Financial Services being the biggest losers, down 2.6%/3.1% respectively. IT restricted the market fall as it was up 1.4% while Pharma (+0.8%) and Auto (+0.3%) also provided support to the market. India VIX further cooled down by 2.4% to 32 levels. Oil prices fell over 5% towards $34 a barrel as tensions rose between the United States and China, and doubts grew about the pace of demand recovery from the coronavirus crisis.
RBI in a surprise move today, announced a Repo Rate cut of 40 bps to 4% and lowered the Reverse Repo Rate to 3.35% from 3.75%. It also extended loan moratorium period by another 3 months till August 31st and raised the limit on banks' group exposure to companies. Though this is a welcome step and can provide relief to the borrowers, there is a fear that the burden on the banks may further increase due to the impact of the moratorium on banks' already huge pile of NPAs. Further RBI failed to announce any relief on restructuring of loans to address the risk of rising asset quality issues in the banking sector.
Meanwhile global markets fell as China moved to impose a new security law on Hong Kong after last year’s pro-democracy unrest, further straining fast-deteriorating US-China ties. Additionally, China announced that it has dropped its annual growth target for the first time, which further added to concern about the fallout from the COVID-19 pandemic.
In the near term, the market will focus on the global cues and the quarterly results. Investors will closely monitor the development of coronavirus cases and vaccines, US-China relationship, crude oil prices movements and economic policies.
Technically, if Nifty manages to sustain above 9150 levels, then we may see a bounce towards 9300 - 9350 zone. On the flipside, support is placed at 8900-8800 zone.”
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