Extending their losses into the third consecutive session, the Indian equity benchmarks the Sensex and the Nifty ended in the red on July 28.
Flagship index the Sensex plunged 776 points while the Nifty hovered near 15,500 in morning trade, mirroring weak global cues.
As per media reports, the Nasdaq Golden Dragon Index declined over 6 percent in each of the last 2 days and posted the worst 2-day fall since 2008.
The 98-stock index which tracks China’s companies listed in the US has declined over 15 percent in the last 3 days. It has wiped out over $200-billion worth of market capitalisation during the same time.
However, the market pared losses in the second half of the session. At close, the Sensex was 135 points, or 0.26 percent, down at 52,443.71 while the Nifty was at 15,709.40, down 37 points, or 0.24 percent.
The BSE Midcap index ended flat while the smallcap index fell 0.45 percent.
Most sectoral indices suffered losses but BSE Telecom bucked the trend and ended with a strong gain of 4.41 percent. The metal index closed 1.41 percent higher.
Here are 5 key factors that kept the market under pressure:
1. Weak global cues: The Indian market developed cold feet tracking the trends of other Asian markets. As per Reuters, Asian shares stayed stuck at seven-month lows on July 28, as markets continued to digest a storm in Chinese equity markets.
China's Shanghai Composite Index fell a percent while Japan's Nikkei cracked almost 2 percent. Korea's KOSPI was down about half a percent.
The Hang Seng Tech Index declined over 8 percent to post the worst day since 16 July 2020. It has declined over 15 percent in the last 3-day fall.
2. Caution ahead of Fed outcome: Investors were also cautious ahead of the UD Fed meet outcome to get a cue on the future trajectory of the stimulus programmes and rate hikes.
The Federal Reserve's policy committee began its two-day meeting on July 27, amid speculation it could show the first signs of easing up on massive bond purchases that are supporting the US economic recovery.
3. IMF cuts GDP forecast: Market sentiment was also influenced after the International Monetary Fund revised its growth forecast for India.
The International Monetary Fund, on July 27, cut India's gross domestic product (GDP) growth forecast to 9.5 percent for the fiscal year 2021-22, from the previous forecast of 12.5 percent, citing the hit on economic activity and demand due to the deadly 'second wave' of the COVID-19 pandemic.
"Growth prospects in India have been downgraded following the severe second COVID wave during March-May and expected slow recovery in confidence from that setback," the multilateral institution said in its latest World Economic Outlook report.
The report said that steady recovery is not assured anywhere so long as segments of the population remain susceptible to the virus and its mutations. "Recovery has been set back severely in countries that experienced renewed waves— notably India," it said.
4. Delta variant: The delta variant of COVID-19 has triggered a rise in cases globally and experts warn that this variant remains a key challenge in the way of beating the pandemic. Cases have been rising globally and a sluggish pace of vaccination has augmented the concerns of a third wave.
5. Technical factors: Nifty50 broke below its crucial support placed at 15600, and now trades near crucial support at 15550-15500 levels. The index is trading below the crucial short-term moving average such as 5, 10, 20 & 50-Days Moving Average which is a sign of caution for the bulls.
The short-term trend has turned bearish while the medium and long-term trend is still on the upside. The Nifty50 started off on a muted note on Wednesday amid a weak trend seen in other Asian markets.
“Going ahead, we expect the index to extend the ongoing consolidation in the broader range of 15950-15500 with stock specific action amid the progression of Q1FY22 earning season,” Dharmesh Shah, Head–Technical, ICICIdirect, said.
“The volatility would remain elevated ahead of Federal Reserve meeting followed by monthly expiry on Thursday. However, despite elevated volatility, we do not expect the index to breach the key support threshold of 15600-15500,” he said.
Shah further added that extended breather from here on should not be construed as negative. Instead, dips should be capitalised on to accumulate quality stocks amid the progression of the Q1FY22 earnings season.
(With inputs from Reuters and other agencies.)
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