After posting decent gains in the previous session when the benchmark indices gained nearly 1 percent, the S&P BSE Sensex fell 600 points, or about 1.5 percent, to 39,922 levels, while the NSE’s Nifty 50 Index ended the session at 11,730 levels, down 160 points. , or 1.34 percent.
Sales were seen across the board and financial stocks took the biggest hit. The volatility gauge, India VIX, rose nearly 5 percent to 23.2.
“Going forward, the market is likely to remain in a tight range, following cues from the ongoing earnings season, developments around the US elections, and global covid cases. Technically , until Nifty breaks through the immediate 11850 hurdle, further weakness could be seen towards the next key support at 11650, while the upside resistance has moved lower at 11950, “said Siddhartha Khemka, Head of Retail Research, Motilal Oswal Financial Services.
Here is a list of the main factors that led to a sharp drop in the market on Wednesday.
Emerging cases of coronavirus: Rising Covid cases, both domestically and globally, weighed on investor sentiment on Wednesday. According to a Reuters report, India’s coronavirus case count remained below 10,000 from the dismal 8 million milestone, as 43,893 new cases were reported in the past 24 hours. With a total of 7.99 million, India has the second highest number of confirmed cases after the United States, which has a tally of 8.7 million.
Weak global signals: Asian stocks and US equity futures fell in trading Wednesday as coronavirus cases rose at an alarming rate in the US and Europe, sparking fears that economies will once again turn to travel blocks and restrictions. German Chancellor Angela Merkel reportedly wants to close all restaurants and bars and some other venues from November 4 in an attempt to curb new infections.
US Election Concerns: Another major factor that kept investors on edge is the uncertainty surrounding the US presidential election scheduled for November 3, 2020. According to international media reports, Democratic challenger Joe Biden is currently leading Donald Trump in national polls as the US approaches its 2020 presidency. election. Market participants have cautiously gambled on Biden’s victory and possibly a “blue wave” outcome, where Democrats also take over the Senate, reports say.
Bihar elections: Investors were also cautious as the first phase of voting for the Bihar Assembly elections began today. The main contest is between the ruling National Democratic Alliance (NDA) coalition led by the Bharatiya Janata Party (BJP) and the ‘mahagathbandhan’ at this stage of the polls.
“Factors like the new brakes in many European countries and the Bihar elections that started today have impacted sentiment. Although the market is in a tight range during the last few sessions, there is not much to read about today’s decline, investors. they refrain from taking positions, “said AK Prabhakar, research director at IDBI Capital.
Reserve earnings before maturity of F&O: Trading was expected to be volatile this week due to the expiration of futures and options (F&O) contracts for the October series on Thursday. Based on refinancing data as of Tuesday, analysts say markets are going to experience a wild turn on both sides, as foreign investors have hedged their position ahead of key events looming in November.
“A 22 percent boost to short indices projects a bold positioning of FIIs with just a couple of days to expiration. With this, long indices make up just 54 percent of index futures, a far cry from 71 percent seen earlier this month. However, an 11% increase in call longs, as well as a 22% increase in short puts, suggest that FIIs are also adequately hedged to a positive surprise. Overall , the possibilities of a unilateral move seem limited, “read an October 28 note from Geojit Financial Services.
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