Sensex falls 1,375 pts, Nifty below 8,300; 5 factors weighing on markets

After four sessions of gains and consolidation, the benchmark indices fell sharply on March 30 with the BSE Sensex falling below 29,000 levels due to sharp correction in banking & financials, auto, metals and realty stocks.

At close, the BSE Sensex was down 1,375.27 points or 4.61 percent at 28,440.32, and the Nifty50 fell 379.15 points or 4.38 percent to 8,281.10.

The broader markets also caught in a bear trap as the Nifty Midcap index was down nearly 3 percent and Smallcap index fell over 2 percent.

The volatility remained higher today as India VIX rose 1.5 percent to 71.50. "Volatility is likely to persist in the market in the near term as investors assess the impact of the corona virus-induced lockdown on the economy," Sundar Sanmukhani, Head of Fundamental Research Desk at Choice Broking told Moneycontrol.

Here are 5 key factors that weighed down the market:

Weak Global Cues

The global markets continued to fall amid increasing COVID-19 cases worldwide, especially in US and Europe.

Asian markets, barring Australia, closed Monday's session in the red. Japan's Nikkei, China's Shanghai Composite and Hong Kong's Hang Seng were down 0.9-1.6 percent after 3-4 percent fall in US markets on Friday.

However, Australia's ASX 200 rallied 7 percent after the government said it will spend $80 billion over the next six months to protect jobs.

European markets also traded lower with France's CAC, Germany's DAX and Britain's FTSE down 0.4-1 percent at the time of publishing this copy.

Reports suggest that the lockdown could extend upto six months as the United States and some European countries announced further restrictions on the general public. Australia already said the country could extend the lockdown for up to six months to control the spread of COVID-19, while India, last week, announced a 21-day lockdown.

Recession Fears

IMF chief announced that the globe has entered into a recession which would be worse than the financial crisis of 2008-2009.

"It is clear that we have entered a recession that will be worse than the one witnessed in 2009 following the global financial crisis, Kristalina Georgieva, IMF chief said in an online press briefing.

The coronavirus pandemic has driven the global economy into a downturn that will require massive funding to help developing nations, she said on March 27.

The rise in Coronavirus Cases

The rapid increase in COVID-19 cases has been a cause of concern for the entire world including the financial markets. The novel coronavirus has butchered all asset classes and forced the world to fall into recession.

As of March 30, more than 7 lakh cases have been reported and over 34,000 have died due to the novel disease. The US has seen a significant rise in cases in the last month, and New York has now become the epicentre of the outbreak.

In India, more than 1,100 people have contracted COVID-19 and 31 have died.

Fall in Crude Oil Prices

The virus-led lockdown in major parts of the world reflected in the behaviour of oil prices as they fell more than 9 percent intraday today to hit more than 17 years low.

"Further fall in crude oil prices extending last week losses as the global coronavirus pandemic worsened and the Saudi Arabia-Russia price war showed no signs of abating kept the sentiments sober," Sundar Sanmukhani said.

International benchmark Brent crude futures traded at $22.99 a barrel, the lowest level since October 2002, down 7.8 percent from the previous close. Oil prices have now plunged 68 percent from its 2020 high seen in early January.

Technical View

The Nifty50 fell 4.3 percent to form small bodied red candle which resembles an Inverted Hammer pattern on the daily charts.

An Inverted Hammer is a reversal pattern in which the index trades near its opening levels. It has a long upper shadow, small or no lower shadow, and a small body.

The index formed an Inverted Hammer or Shooting Star kind of candle on the daily chart which indicates a pause in bounce back if follow up supply happens on next trading sessions. However, it still requires confirmation.

"8,000 would be seen as key support. Traders are advised not to take aggressive/leveraged bets and should ideally keep booking profits on a regular basis. For a time being, the strategy would be to take one step at a time and keep focusing on quality names," Sameet Chavan, Chief Analyst-Technical and Derivatives at Angel Broking told Moneycontrol.