5 Reasons Why Sensex Gave Up 50000 Points

Share market in India amid resurgence of coronavirus cases in the financial capital of India slid for another day. At the close, afternoon losses were extended, with Nifty ending with losses of 306 pts. or 2.05% at 14676, while Sensex gave up 50000 pts to end lower by 1145 points at 49744, down 2.25 percent.

Among sectoral indices, drag came from media,IT and realty with losses of over 3 percent towards the close, with only metal index trading higher with gains of over 1 percent. Nifty PSU Bank and Nifty Pharma also ended with weakness of close to 3 percent.

Individually on the stocks front, among the top laggards were stocks like M&M, Dr. Reddy's Labs, Tech Mahindra, ITC and Axis Bank.

Here are some of the recent pullback:

1. Heavyweights slump:

RIL, HDFC continue to weigh on the overall market strength. RIL scrip lost a good 2.5 percent after the SC stopped the Future Retail deal, giving advantage to Amazon.

HDFC stock also lost close to 3 percent to day's low price of Rs. 2656.6 per share.
TCS is another scrip putting pressure on the indices with price declining below the buyback price.

2. Coronavirus resurgence:

This risk which may lead to halt in economic activity also put a pressure on the Dalal Street. The state of Maharashtra has placed fresh restriction to put a curb on the spread of the virus.

3. Pace of foreign funds into Indian markets have moderated:

Even though India is seen among the best emerging market from an investment perspective, there is seen slowing in the pace at which the foreign funds are finding their way into Indian markets."These concerns have impacted FPI flows to the market which, though positive, appears to be slowing down. Clear trends on these concerns have to be watched," said V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services.

4. Rising inflation is another concern weighing on the street:

On immense liquidity i.e. being poured world over to tackle the fall out of the coronavirus, there is a threat of inflation and bond yields are rising, and consequently equity valuations are seen to be stretched.

In India too yields have risen to its highest since August. Bond yields are inversely proportional to equity returns and when bond yields decline, equity markets tend to outperform while when yields rise equity market returns tend to falter," explained Nirali Shah, head of equity research at Samco Securities.

5. Oil on a boil:

As crude is imported in good amounts into the country, any surge in its price will push the price of products higher. Brent crude was up 76 cents, or 1.2 per cent at $61.67 a barrel after gaining nearly 1 per cent last week. The US oil rose 74 cents, or 1.3 per cent, to $59.98 a barrel, having fallen 0.4% last week.

And this oil price shares negative relationship with the stock markets and there are companies into tyre, refinery, airlines, logistics which need crude for their operation or as a raw material. Further, products like paints too will benefit from reduced crude oil prices. A fall in crude-oil prices affects the input cost of producing these goods. Thus, a fall in crude oil prices have a positive impact on the stocks of these companies.

GoodReturns.in