Domestic markets suffered the sharpest slump in weeks after both Sensex and Nifty tanked on Monday.
At around 12 pm, BSE Sensex was trading lower by 1,715 points, barely holding on above the 32,000-mark. NSE Nifty was also down over 5 per cent or nearly 500 points at 9,370. Experts predicted Nifty to consolidate at 9,300 points.
Several factors including the extension of the lockdown are responsible for damp investor sentiment on D-Street, in line with weak global cues in the wake of fresh trade spat between the US and China.
Weak company results have also kept investors on the edge as companies keep posting sharp profit drops in the March quarter.
Here are key factors that have stoked fresh tension in the domestic stock market:
Fresh US-China spat
Investors around the globe, who were already finding it difficult in dealing with the economic impact of the Covid-19 pandemic, have been pushed back further by renewed trade tension between the US and China.
The fresh tensions brewing between the two major economies over Covid-19’s origin, which hit the US hard, has led to renewed threats of tariffs. Investors are worried that any further disruption in trade could be potentially disastrous for global growth, especially as most countries expect a contraction in GDP.
The renewed trade spat between the US and China gained momentum after the former blamed Beijing for the spread of Covid-19.
The earlier trade tussle between the US and China also affected stock markets, but experts say that any fresh sanctions now could be potentially disastrous for countries looking to restart their economies after the prolonged lockdown.
Investors who were looking at the resumption of key economic activities after May 3 are worried about the fresh lockdown extension.
Even though lockdown 3.0 brings certain relaxations, large number of key economic activity remains suspended.
Tourism, travel, hospitality, automobile are just some of the sectors that have been hit hardest due to the lockdown.
Most economic activities resumed in Green and Orange zones in a controlled manner. However, economic activities in red zones will have more limitations.
It may be noted that containment zones will see strict lockdown and no business activities will be allowed. Click here to know the full lockdown 3.0 rules.
Weak company results
Another reason behind the dampened market mood is due to weaker-than-expected fourth-quarter results.
The overall Q4 earnings season outlook has been disappointing with top companies such as Reliance Industries Limited, Tech Mahindra, Maruti Suzuki, Hindustan Unilever performing badly.
While most companies hope to bounce back only in the latter half of the year, it will depend on how the situation evolves after the lockdown. At the moment, investors are pinning their immediate hopes on businesses resumption after the lockdown.
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