After a long gap, FIIs turned sellers on Monday. The combined selling by FIIs and DIIs pulled the market down sharply with a 306-point cut in Nifty. Sharp corrections like this are normal and even desirable in a bull market, said analysts.
“When valuations are high some triggers will cause corrections. The escalation in Covid cases in Maharashtra, a spike in crude and rising bond yields provided the trigger for correction. Correction in Nasdaq yesterday is another reminder that excessive valuation cannot sustain. Investors should wait and watch for stability & consolidation in the market before making fresh commitments,” said VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services.
Factors driving markets
- US bond yields ease: Benchmark US Treasury yields eased from a near one-year peak on Monday. Meanwhile, the European Central Bank is “closely monitoring” the recent rise in government bond yields,
- Dollar plunges: The dollar reached multi-year lows on Monday against the British pound and the Australian dollar as traders focused on the promise of coronavirus vaccinations and economic growth outlook.
- Stimulus coming: US President Joe Biden on Monday launched changes to the US coronavirus aid program for small businesses to try to reach smaller and minority-owned firms. The advancement of a proposed $1.9 trillion US Covid-19 relief bill added to concerns about inflationary pressures.
How are the blue chips doing?
After opening in the green, benchmark indices surged further. At 10.40 am, BSE flagship Sensex was up 568 points or 1.14 per cent to 50,313. NSE benchmark Nifty followed and added 167 points or 1.14 per cent to 14,843.
“Whilst the markets have opened in the green, the short-term trend remains negative for the time being. Until we do not get past 15,100 on the Nifty, any upmove should be utilized as an opportunity to go short. The index has a support range between 14,500 and 14,700 but given the high volumes traded yesterday, there is every possibility we break that range,” said Manish Hathiramani, proprietary index trader and technical analyst, Deen Dayal Investments.
In the 50-share pack Nifty, ONGC was the biggest gainer, up 6.11 per cent. Tata Motors, GAIL, BPCL, L&T, Indian Oil, HDFC Life Insurance, Bajaj Finance, Hindalco and ICICI Bank were among other gainers.
Asian Paints was the top loser in the pack, down 2.85 per cent. Kotak Mahindra Bank, UPL, Maruti Suzuki, Tech Mahindra, Bajaj Auto, M&M and Dr Reddy’s Laboratories were other losers in the pack.
Broader market indices traded with gains outperforming their headline peers in morning trade. Nifty Smallcap was up 0.92 per cent while Nifty Midcap added 0.81 per cent. The broadest index on NSE — Nifty 500 — was up 0.50 per cent.
AU Small Finance Bank, Prestige Estates, Apollo Hospitals, CDSL, Firstsource Solutions and Linde India were among major gainers from the space while IOL Chemicals, Strides Pharma, Kajaria Ceramics, Future REtail, Mindtree and Pfizer were under selling pressure.
MSCI’s broadest index of Asia-Pacific shares outside Japan ticked up 0.2 per cent after dipping to 719.8, the lowest level in two weeks. The gauge has eased from last week’s record top but is still up just over 9 per cent so far this year.
The Australian S&P/ASX 200 and Singapore’s Straits Times index both gained 0.6 per cent and Hong Kong advanced 1.1 per cent. South Korea’s Kospi was a prominent loser, down 0.3 per cent, while Taiwan eased 0.05 per cent.
Japanese markets were closed for a public holiday.