The benchmark indices fell on Monday amidst concerns about rising inflation and Covid-19 cases. Additionally, the increase in US bond yields, already hovering at a 13-month high, and crude oil prices is also keeping investors on tenterhooks.
The BSE Sensex opened the session lower and plummeted 993 points before recouping some of the losses. The Sensex ended the session at 50,395, a decline of 397 points or 0.78 per cent. The Nifty, on the other hand, fell 0.67 per cent or 101 points to end the session at 14,929.
On Monday, India recorded 26,291 new Covid-19 cases — the highest single-day spike in nearly three months. The recent surge in cases has forced state governments to impose restrictions in various towns, leading to business disruptions. At present, India is the third worst affected country in the world, behind the US and Brazil. Moreover, the suspension of the AstraZeneca vaccine by some countries has led to concerns about whether India might take a similar stance.
Investors are also worried that rising inflation could result in the Reserve Bank of India (RBI) raising interest rates. The consumer price index (CPI)-based inflation rose to 5.03 per cent in February due to the higher food and fuel prices. Food inflation rose to 3.87 per cent in February from 1.96 per cent in January. Moreover, industrial output contracted 1.6 per cent year-on-year in January. These weak macro numbers have spooked investors, who were betting on a recovery here.
“Weakness in national macro data and rise in global bond yield ahead of the crucial US Fed monetary policy meeting dented domestic momentum. However, optimism in European and other Asian markets aided recovery from the sharp initial losses. We can expect this volatility to stabilise based on the global outlook post a confirmation from the US Fed to maintain an accommodative policy,” said Vinod Nair, head of research at Geojit Financial Services.
Most global markets were in the green, following strong data from China and optimism over the progress of the economic recovery.
The market breadth was negative, with 1,831 stocks declining and 1,224 advancing. About two-thirds of Sensex constituents ended the session with losses. Bajaj Finserv was the worst-performing Sensex stock and ended the session with 2.7 per cent. Bajaj Auto and Bajaj Finance fell 2.2 per cent and 2.09 per cent, respectively. Twelve of the 19 sectoral indices on the BSE ended the session with losses. Energy and finance stocks fell the most, and their gauges fell 1.20 and 1.19 per cent, respectively.
The 10-year US bond yield was trading at 1.61 per cent, and the Brent crude traded around $69 per barrel.
Analysts said the outcome of policy announcements by key global central banks would be crucial for equity markets going ahead. This week, the Bank of England and Bank of Japan have their policy meetings apart from the US Federal Reserve.
“While the spread of 10-year US treasury yields and India’s G-Sec yield and dollar index still offer comfort, any sharp deterioration in these prints hereon may pose a risk to the domestic market. However, given the sharp rise in the government’s capital expenditures and various reforms to stimulate investment and consumption activities, underlying strength of domestic equities remains intact,” said Binod Modi, head of strategy, Reliance Securities.