Markets end in the red after good start

Since Tuesday was a trading holiday, on account of Dr. Baba Saheb Ambedkar Jayanti, the markets’ reaction to Prime Minister Narendra Modi’s national address in which he announced the extension of the nationwide lockdown until May 3 was due on Wednesday.

Equity markets did well until 2.00 p.m. The S&P BSE Sensex, at its day’s high of 31,568.36, was up by over 878 points, or 2.86% higher than Monday’s close of 30,690.02 points. Similarly, NSE’s Nifty 50 had gained 2.97%, or added over 267 points to Monday’s close of 8,993.85 to reach Wednesday’s high of 9,261.2 points.

While the announcement was on expected lines, the silver lining was that from April 20 partial unlocking would begin in phases in parts of the country where Covid-19 positive cases are nil to low as per the guidelines issued by the home ministry in the morning.

“Sentiments in the first half of the trading session were upbeat given partial opening up of economy in phased manner,” says Siddhartha Khemka, head, retail research at Motilal Oswal Financial Services (MOFS). “However, it got dampened in the second half, tracking the weak global sentiments which got impacted due to bleak International Monetary Fund (IMF) projections, Khemka adds.

Yesterday, the IMF had predicted that this year, the world would suffer its steepest downturn since the Great Depression of 1930s. IMF also slashed India's projected GDP growth to 1.9% for 2020, from its earlier projection of 5.8% earlier.

“A positive monsoon forecast, Chinese rate cut, and fall in India’s WPI (wholesale price index) for March could not help offset the risk-off sentiment that is gathering pace across the globe,” says Deepak Jasani, head of research at HDFC Securities.

At close, while the Sensex lost over 310 points, or -1.01%, to close at 30,379.81 points, the Nifty 50 lost nearly 69 points, -0.76%, to close Wednesday at 8,925.3 points. “However, the overall market breadth was positive,” says Khemka.

Because, the S&P BSE MidCap and SmallCap, which had added over 148 points (+1.32%) and over 120 points (+1.17%) each at Wednesday’s close. While both the indices gained 3.19% and 3.21% each at their days’ high, at Wednesday’s low too the respective indices were higher by 0.32% and 0.55% compared to their Monday’s close.

“Going ahead, the markets would continue to remain volatile as it would track trend in coronavirus cases and government relief measures to combat the economic crisis due to it,” opines MOFS’ Khemka. “With earnings season starting, investors would also focus on the management commentary with regards to the impact of Covid-19 on their respective businesses.”

Ajit Mishra, vice president–research, at Religare Broking reiterated his cautious view on Indian markets and suggested that investors should not go overboard during this recovery move. “Domestic factors like sharp surge in the coronavirus cases and extension of the lockdown will continue to weigh on the investors’ sentiment ahead,” says Mishra.

And, with regards to the earnings season Mishra believes that more than the earnings’ announcement, the outlook given by the management would hold significant importance for the market participants.

And, on the technical side, HDFC Securities’ Jasani opines that Nifty 50 seems to have formed a temporary top at 9,261 points. “Unless it manages to cross this level, we could see some more weakness in the markets,” says Jasani. And, 8,810 could be the next downward support for the Nifty 50.