Sensex drops 220 points on weak global cues; Nifty tests 11,900

NEW DELHI: Profit booking in banking and financial stocks dragged benchmark indices lower even as buying in auto and metal names provided some support. Weak global cues also hit the sentiments back home.

Bluechip indices have rallied for 10 straight days, the biggest rally in 13 years, and have shown signs of fatigue in the last few days. Analysts expect volatility to remain and suggest cautious stock picking.

Factors driving markets

  • Early stimulus hopes fade: US Treasury Secretary Steve Mnuchin said he and House of Representatives Speaker Nancy Pelosi were “far apart” on another coronavirus economic relief package, and that a deal would be hard to reach before the November 3 elections.
  • US-China tensions: Tensions between Beijing and Washington remain in view after the US State Department submitted a proposal for the Trump administration to add China’s Ant Group to a trade blacklist, according to a Reuters report, before the financial technology arm of e-commerce giant Alibaba is slated to go public.
  • Covid makes a comeback: Concerns that a resurgence in the Covid-19 pandemic could lead governments to again shut down economies spurred profit-taking, particularly after the recent stock rally. With cases surging, some European nations are closing schools, cancelling surgery and enlisting student medics as overwhelmed authorities braced for a repeat of the nightmare scenario seen earlier this year.

How are bluechips doing

After opening with minor cuts, benchmark indices extended their losses as the day progressed. At 9.32 am, BSE flagship Sensex was down 222.50 points or 0.55 per cent to 40,572.24. NSE benchmark Nifty followed, falling 50.65 points or 0.42 per cent to 11,920.40.

In the 50-share pack Nifty, Tata Steel was the biggest gainer, up 2.33 per cent. BPCL, ONGC, UPL, NTPC, Indian Oil, Adani Ports and Asian Paints were among other major gainers.

Wipro continued its slide and was the top loser for the second day, down 2.64 per cent. Tech Mahindra, HCL Tech, ICICI Bank, Bajaj Finance, TCS and ITC were among other major names that opened with cuts.

Broader markets

Broader market indices were trading mixed with Nifty Smallcap down 0.02 per cent while Nifty Midcap rose 0.13 per cent. Broadest index on NSE, Nifty 500 was down 0.05 per cent.

Ashok Leyland, Bharat Forge, Tata Power, Alok Industries, Tata Elxsi and Century Textiles were among major gainers from the space while Lemon Tree Hotels, Thyrocare, PNB Housing Finance, Vodafone Idea, Trent and Bata India were under selling pressure.

Global markets

MSCI’s broadest index of Asia-Pacific shares outside Japan lost 0.5 per cent while Japan’s Nikkei dropped 0.5 per cent.

U.S. S&P 500 futures sagged 0.27 per cent in Asia after major U.S. stock indexes ended the previous session lower, with the S&P 500 closing down 0.7 per cent and the Nasdaq Composite Index shedding 0.8 per cent.

What to expect

  • Q2 earnings: Mindtree, Jupiter Infomedia, Hathway Cable, Cyient, Dolat Capital, South Indian Bank and Trident were among those that will come out with their numbers.

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