Sensex, Nifty drop 1%; 4 factors behind the market fall

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Sensex, Nifty

Indian equities suffered strong losses in the second half of trade on February 19, dragging the equity barometer Sensex, Nifty lower by more than 600 points.

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At 14:35 hours, Sensex was 496 points, or 0.97 percent, down at 50,828 while Nifty was 156 points, or 1.03 percent lower at 14,963.

Mid and small-caps were underperforming as the BSE Midcap and Smallcap indices were down 1.93 percent and 1.01 percent, respectively.

“Markets globally have been consolidating and even slowly drifting down during this week. This trend is due to high valuations and the absence of any fresh positive triggers to take the market higher. This trend might linger for some more time before some trigger leads to a breakout,” said V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services.

Here are 5 key reasons behind the market fall:

1. Weak Asian cues:

Indian equities traded lower, taking cues from the global markets. Asian stocks pulled back from all-time peaks on Friday 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, reported Reuters.

2. Fresh concerns over COVID-19:

The Brihanmumbai Municipal Corporation issued fresh guidelines in Mumbai amid rising cases of COVID19. According to this, if 5 or more Covid patients are found in a building, it will be sealed, the BMC Commissioner IS Chahal said on February 18, ANI reported.

Mumbai Mayor Kishori Pednekar warned on February 16 that a lockdown may be re-imposed in the city if people continue to flout basic COVID-19 prevention rules. Pednekar’s warning came amid concerns over a resurgence of novel coronavirus infections in Mumbai and the rest of Maharashtra.

Lockdown has been imposed in Amravati District from 8 pm on February 19 to 7 am, owing to the rise in COVID-19 cases.

3. Poor show of banking, financial stocks:

Losses in banking and financial heavyweights dragged equity benchmarks lower. Losses in shares of ICICI Bank, Axis Bank, SBI, HDFC Bank, Bajaj Finance and HDFC kept equity benchmarks down.

Nifty PSU Bank index fell more than 5 percent while Nifty Bank and Financial Services indices fell 2 percent.

4. Technical factor:

On February 18, Nifty formed a bearish candle on the daily scale and continued its formation of lower highs-lower lows of the last two trading sessions.

Analysts pointed out the index has to cross and hold above 15,150 to get stability and an up move towards 15,400-15,500 zone, while on the downside, major support is seen around 15,000 and 14,900 zones.

“The daily momentum indicator has turned in the favour of the bears. Thus, the index seems to have stepped into a consolidation phase. The levels of 15,000–15,430 will be the range for the consolidation. However, if 15,000 is breached on a closing basis, the index is in for a deeper correction,” said Gaurav Ratnaparkhi, Senior Technical Analyst, Sharekhan by BNP Paribas.

Disclaimer:

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