Wednesday saw the onset of the new fiscal. However, both the benchmark indices traded in the red all through the first day of FY21.

The S&P BSE Sensex fell 1,395 points, or 4.73%, from Tuesday’s close of 29,468.49 points to touch the day’s low of 28,073.43 points. And, the National Stock Exchange’s Nifty 50 declined over 399 points, or 4.65%, from its previous day’s close of 8,597.75 points to Wednesday’s low of 8,198.35 points.

The Sensex and Nifty 50 at the end of Wednesday’s trade lost over 1,203 points (-4.08%) and 343 points (-4.0%) to close at 28,265.31 points and 8,253.8 points, respectively. According to Ajit Mishra, vice president–research at Religare Broking, the markets witnessed a sharp decline as participants took note of a sudden surge in Coronavirus cases in India and weak auto sales numbers.

“Besides, feeble global cues and a continuous outflow of foreign funds are also weighing on the sentiments,” Mishra said. “In the near term, there are no fresh positive triggers, which can boost investor sentiments,” he added. “We reiterate our cautious view on the markets and suggest keeping extra care for stock selection and risk management.”

Domestically, the government on Tuesday had announced cuts in the interest rates of several small savings schemes like Public Provident Fund (PPF), Kisan Vikas Patra (KVP), and National Savings Certificate (NSC), among others. Shrikant Chouhan, executive vice president–equity technical research at Kotak Securities, said that the rate cuts indicate that fiscal deficit will rise significantly. “In such a scenario, the financial sector turns vulnerable and today we witnessed a similar trend in the markets,” he said. “On the other hand, the rising number of Coronavirus cases is keeping the world markets on tenterhooks.”

Chouhan also highlighted that investors are shifting to safe havens like dollar and gold from risky asset classes. Wednesday saw the Indian rupee depreciating to 76.23 a dollar, while the dollar index again moved to 100. “Technically, the Nifty 50 has broken the 8,240 level on an intraday basis, which is negative and may lead to further weakness in the markets,” Chouhan warned.

While the Covid-19 pandemic affected numbers are on the rise, March 2020 alone saw foreign portfolio investors (FPIs) having sold equities worth ₹61,972 crore. This makes it more than evident that the markets are possibly anticipating worsening of the situation.

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