The market corrected for the second day in a row with Nifty breaking below 15,000-mark on March 5. The broader markets, which outperformed in the previous four consecutive sessions, also slipped into the red.
The Nifty Midcap 100 index was down 2.15 percent and Nifty Smallcap 100 index declined 1.55 percent, while the Nifty Midcap 50 fell 2.79 percent at the time of writing this copy.
At close, the BSE Sensex plunged 440.76 points or 0.87 percent to 50,405.32, and the Nifty50 dipped 142.70 points or 0.95 percent to 14,938.10.
Here are five key factors that weighed on the market:
Global Cues
The global markets were under pressure as rising bond yields and dollar index hit investor sentiment. The 1-2 percent correction in US equity markets on Thursday also weighed on sentiment as Federal Reserve Chair Jerome Powell disappointed some investors by not indicating that the Fed might step up purchases of long-term bonds to hold down longer-term interest rates, reports Reuters.
Japan’s Nikkei was down 0.23 percent and South Korea’s Kospi fell 0.57 percent, while Hong Kong’s Hang Seng declined 0.47 percent and Australia’s ASX 200 was down 0.74 percent. China’s Shanghai Composite corrected 0.04 percent.
European Markets – France’s CAC, Germany’s DAX and Britain’s FTSE were down 0.6 percent, 0.77 percent and 0.06 percent respectively at the time of publishing this copy.
Bond Yields
The rising bond yields and dollar index also acted as a spoiler for the equity market, as it can impact the FII flow which was quite strong in last one year.
The yield on 10-year Treasuries climbed above 1.5 percent to as high as 1.5727 percent, but still below a one-year high of 1.614 percent seen on February 25. Bond investors with a bearish view of Treasuries took heart in Powell’s remarks and sold the notes, reports Reuters.
Stronger economic data should push the benchmark 10-year US Treasury yield up to 1.9 percent by the end of 2021, the Reuters said quoting Goldman Sachs on Thursday.
On Thursday, Powell said the economic reopening could “create some upward pressure on prices,” noting that he expects the central bank to be “patient” on policy action even if the economy sees “transitory increases in inflation.” However, Powell acknowledged that the recent rise in bond yields had caught his attention. Reports CNBC.
The rising bond yields increased the demand for US dollar, as the Dollar Index traded higher by 0.3 percent against the basket of world’s major currencies, to 91.88, the highest level since November last year, against 91.63 seen in previous session.
Oil Prices at 14-Month High
Oil prices rallied around 2 percent or over $1 a barrel today, hitting their highest levels in nearly 14 months, after OPEC and its allies agreed not to increase supply in April as they await a more substantial recovery in demand amid the coronavirus pandemic, reports Reuters.
Brent crude futures for May rose to as high as $68 a barrel on Friday, a level not seen since January 8, 2020. The contract was up $1.22, or 1.83 percent, to $67.96 a barrel.
US West Texas Intermediate (WTI) crude futures climbed 1.72 percent, to $64.93 per barrel.
Goldman Sachs raised its Brent price forecast by $5 to $75 per barrel in the second quarter and $80 per barrel in the third quarter of this year, while UBS raised its forecast for Brent to $75 per barrel and for WTI to $72 per barrel in the second half of 2021.
Every rise in oil prices is a bigger concern for oil importers like India.
Sectors in Focus
All sectoral indices traded in the red with the Nifty Metal index hitting the most, falling 2.7 percent. Nifty Bank, Auto, Financial Services, IT and Pharma indices were down 1-1.6 percent.
Technical View
The Nifty50 fell over a percent and has broken the crucial psychological support of 15,000 mark, indicating the nervousness in the market going ahead. The index formed small bearish candle on the daily charts.
“The markets have had yet another day in the red. However, it has not broken the medium term support range of 14,700-14,800. If we break that, we could travel south to levels closer to 14,400-14,500. If we bounce from these levels, we would need to get past the 15,300 level to move to higher targets of 15,500-15,600. Until then the Nifty is going to be range bound and choppy,” Manish Hathiramani, proprietary index trader and technical analyst at Deen Dayal Investments said.
