The market, after seeing consolidation in the previous sessions, plunged sharply and closed more than 1.6 percent lower on September 4.
The BSE Sensex closed 633.76 points, or 1.63 percent lower, at 38,357.18 and the Nifty50 ended 193.60 points or 1.68 percent, lower at 11,333.90.
The broader markets also declined, with the Nifty Midcap index falling 1.67 percent and Smallcap declining 1.16 percent.
Here are five factors that weighed on the market:
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Global cues
Globally, equity markets corrected following a sharp fall in the US benchmark indices due to a major decline in the technology sector and concerns over economic recovery. S&P 500 fell 3.5 percent, Nasdaq Composite was down 5 percent and Dow Jones plunged 2.8 percent on September 3.
Asian equities followed suit. Japan’s Nikkei, China’s Shanghai Composite, Hong Kong’s Hang Seng, Australia’s ASX 200 and South Korea’s Kospi were down 1-3 percent.
The CBOE Volatility Index surged by 26.46 percent to close at 33.60 on September 3, indicating the bulls were not in a strong position. Dow Jones futures were down a quarter of a percent, indicating volatile trade in the US on September 4.
Banking & Financials
The selling in banking and financials pressured the market. The Nifty Bank was down 2.2 percent and the Nifty Financial Services index fell 1.88 percent amid uncertainty over loan recovery after the latest Supreme Court directions.
The court, which is hearing a petition seeking an interest waiver on loan moratorium, said banks should not declare accounts as non-performing assets (NPAs) for two months and must not take coercive action against borrowers.
However, taking banks’ submissions on record, the court said that “accounts not declared NPAs till August 31 not to be declared NPAs till further orders”. The top court will continue the hearing on September 10.
IT index under pressure
IT stocks also saw correction following a steep fall in US technology stocks. The Nifty IT index fell 1.5 percent as Wipro, HCL Technologies, Infosys and Mindtree were leading losers.
India-China border tensions
The market is also closely watching the developments with respect to India-China border issues as the two sides look to resolve the current situation through dialogue at both the military and diplomatic levels.
“The situation along Line of Actual Control (LAC) is slightly tensed. Keeping in view of the situation, we have taken precautionary deployment for our own safety & security, so that our security & integrity remain safeguarded,” Army chief MM Naravane told news agency ANI. Naravane has been on a two day visit to Leh in Ladakh.
On September 2, India banned 118 more Chinese apps, including popular video game PUBG, amid escalating tensions along the LAC in eastern Ladakh. Reports also suggest that Indian soldiers have taken dominating positions at ‘Finger 4’ along the Pangong Lake. The military is also reportedly keeping a close watch on the People’s Liberation Army (PLA)’s build-up at Depsang-DBO.
Technical View
The Nifty50 opened with a gap down and closed sharply lower, forming Doji pattern on daily charts and Bearish Engulfing pattern on the weekly scale.
Experts are not too worried about the fall, as the index has been consolidating in a range and holding on to 11,300, which is a crucial support.
“We managed to stick above the 11,300 level which is a saving grace for the bulls until markets reopen on Monday. If we breach this level on a closing basis, we could enter into a short term bear phase. On the upside, we need to get past 11,600 for the markets to continue its upward momentum,” Manish Hathiramani, Proprietary Index Trader and Technical Analyst at Deen Dayal Investments said.
