Markets end in red despite early gains

Following Tuesday’s record biggest single-day gain since May 2009, the benchmark indices were on an up move on Wednesday morning. After closing at 30,067.21 points on April 7, the S&P BSE Sensex gained over 1,160 points (+3.86%) to touch the day’s high of 31,227.97 points. The NSE’s Nifty 50 also added over 339 points (+3.86%) to touch Wednesday’s high of 9,131.7 points.

However, both the benchmark indices failed to close in green. While the Sensex lost over 464 points (-1.54%) from its previous day close to touch the day’s low of 29,602.94 points, and the Nifty 50 lost over 138 points (-1.57%) to touch its lowest of the day at 8.653.9 points. At the end of Wednesday’s trade, the Sensex lost over 173 points (-0.58%) to close at 29,893.96 points, while the Nifty 50 closed over 43 points (-0.49%) lower at 8,748.75 points.

According to Vinod Nair, head of research at Geojit Financial Services, the markets gave up the gains following a negative opening in the European markets and uncertainty regarding the spread of Covid-19 infections. “Markets are also uncertain as to the government response after the official 21-day lockdown expires on April 14,” says Nair. While some states are reportedly looking to extend the lockdown, there are reports of some considering withdrawing it in a phased manner. “The longer the lockdown stays, more the impact on the economy and companies,” says Nair.

According to Ajit Mishra, vice president, research at Religare Broking, the Nifty 50’s marginal fall was led by selling in a few IT (information technology), banking and metal stocks. “On the other hand, buying interest was seen in sectors like healthcare and auto which were up in the range of 2-4%,” says Mishra. “The broader markets managed to hold on to their gains as both MidCap and SmallCap indices closed higher by 1.9% each.”

The S&P BSE MidCap and SmallCap indices gained 4.63% and 3.88% each at their day’s high of 11,269.59 and 10,177.18 points respectively. While the MidCap index lost over 83 points (-0.77%) at the day’s low, the SmallCap was up over 23 points (+0.24%) compared to its previous day close at its day’s low.

Going forward, experts are of the view that volatility will continue to rule investor mindsets. “The markets are expected to remain choppy while there could be intermittent relief rallies on account of any positive news regarding Covid-19,” says Religare Broking’s Mishra.

On the domestic front, in Mishra’s opinion, IIP data for the February month which is scheduled to be released on April 9 could provide a sense of the impact of the virus-caused disruption on manufacturing. “Further, the outcome of OPEC meeting will also be keenly watched by the market participants across the globe,” Mishra adds. “Considering the scenario, we suggest continuing with hedged positions and preferring index majors over the others for trading.”

On technical grounds, Sahaj Agrawal, head of research, derivatives at Kotak Securities, opines that Nifty 50 has staged a swift recovery to test 8,900-9,000 levels. “Momentum indicators indicate possibility of further upside towards 9,300-9,400 (levels),” says Agrawal. He sees the support zone for the Nifty 50 at 8,500-8,700 levels. “The current up move is broad based, and hence expect positivity to continue for few more trading sessions,” Agrawal adds.

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