Sectorally, selling pressure was seen in healthcare, realty, capital goods, banks, and capital goods sectors.
Indian market reversed gains
and fell into the red in the second half of the trading session weighed by weak
domestic cues.
The
S&P BSE Sensex hit a high of 40,010, but reversed gains, touching the low
of 38,395.89, while Nifty50 slipped to touch 11,325.85 on the downside in
intraday trade.
The
S&P BSE Sensex closed 839 points, or 2.13 percent, down at 38,628.29 while
the Nifty50 fell 260 points or 2.23 percent to 11,387.50 levels.
The meeting between the
Securities and Exchange Board of India (SEBI) with brokers, leading corporates,
exchanges, and depositories on Monday has been concluded and the Sebi is ready
to move into the new margin pledge and re-pledge system from September 1, 2020.
The
change in margin system and securities pledge-repledging could undoubtedly
bring disruptions in volumes of daily trading as there is insufficient
preparation and validation by the participants in this system - viz Exchanges,
Depositories, Depository Participants, Clearing corp, Brokers and clients,
suggest experts.
"We
could witness further polarization of stocks in the markets for some time with
the top 200-300 stocks seeing the most depth and liquidity. The securities
currently pledged with the brokers need to undergo the new process, which so
far is not smooth going by the runs conducted so far," Deepak Jasani, Head
of Retail Research, HDFC Securities told Moneycontrol.
"Hence,
large traders are unsure as to whether they will have limits to trade on Sept
01 which may lead to volume drop in both Cash and F&O segments that may
last a few days/weeks," he said.
We have collated a list of factors that could be weighing on
markets:
Border Tensions:
Indian
markets reversed gains after tensions between India and China border near
Ladakh escalated. Chinese troops violated consensus and carried out provocative
military movements on the night of August 29-30, aimed at changing the status
quo at the Line of Actual Control (LAC), the Indian Army said on August 31.
The
army further said that Indian soldiers pre-empted People’s Liberation Army
(PLA)’s activity on the southern bank of Pangong Tso and undertook measures to
strengthen positions and thwart Chinese intentions.
History
suggests that equity markets do not like uncertainty.
Profit
Booking:
After
rallying for three consecutive months since May both Sensex and Nifty50 climbed
crucial resistance levels. The S&P BSE Sensex reclaimed 40,000 in intraday
trade while the Nifty50 was also trading around 11800 before it gave up gains
and turned negative.
Most
experts were anticipating some consolidation in Nifty in the first week of
September.
GDP Data expected to contract:
The
Street would watch out for the GDP data for the June quarter which is likely to
turn negative. Economists are of the view that the Indian economy will contract
in April-June this year.
ICRA, a
credit rating agency and consulting firm, has projected that India's GDP would
contract 25 percent in the April-June quarter.
According
to ICRA, that economic performance was primarily weighed down by the
considerable drag imposed by three key production sub-sectors, namely
manufacturing, construction, and trade, hotels, transport, communication and
services related to broadcasting.
The
State Bank of India's (SBI) research report Ecowrap has projected that India's
GDP may contract by 16.5 percent during the quarter due to lower-than-expected
de-growth in corporate GVA (gross value added)
Broader markets under pressure:
Both
the S&P BSE Small-cap index, and the Mid-cap index fell more than 3 percent
each on Monday. The Small-cap index recorded double-digit gains in 3 out of the
last 5 months; hence, some bit of profit-taking was on the cards.
Also,
broader markets wiped out most of the gains made in the year 2020 as on Friday
thanks to strong global liquidity. Hence, there could be some profit-taking in
the near term but that will still be a good buy on dips opportunity.
“All
active investors must remember the valuation of midcap index P/E close to 106
in December 2017 due to very high inflow of money in mutual funds post
demonetization period, & since then Investors hardly made any money in
midcaps,” Amit Jain, Co-founder & CEO, Ashika Wealth Advisors told
Moneycontrol.
“So in
our view, in this liquidity-driven rally, the risk-reward ratio may not be very
favorable, so all Investors should be very cautious with their entry point in
markets,” he said.
Disclaimer: The
views and investment tips expressed by experts on Moneycontrol.com are their
own and not those of the website or its management. Moneycontrol.com/SD Solutions
advises users to check with certified experts before taking any investment
decisions.
Source - Moneycontrol.com
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