Sensex and Nifty erased most gains of last week and ended 2.1% lower each on Monday, due to panic selling on a fresh round of border tensions with China. Reversing the trend, Sensex ended 839 points lower at 38,628, while Nifty lost 260 points to 11,387 after six sessions of straight gains. Investors lost Rs 4.5 lakh crore on BSE after the Indian Army said Chinese troops violated the previous consensus arrived at during military and diplomatic engagements amid the ongoing standoff in Eastern Ladakh on August 29 and 30. ONGC and TCS were the only gainers, while Sun Pharma, ICICI Bank, Kotak Bank and Bajaj Finserv were the top Sensex losers falling up to 6%.
On Friday, Sensex ended 353 points higher at 39,467 and Nifty ended 96 points up at 11,655. During the last week, Sensex and Nifty rose 1,032 points (2.69%) and 275 points (2.42%), respectively. Sectorally, all the indices primarily ended in red territory, with almost 6% drop in media index, followed by 4-5% fall in metals, realty, banking and pharma. Auto, FMCG and financials closed 2-3% lower, while IT index fell only 1%.
Earlier at the opening bell, indices gained majorly on back of RIl and other banking heavyweights like SBI, ICICI Bank, Axis Bank and IndusInd Bank. However, equities fell deep in red, with Sensex losing 1,372 points from day's high of 40,010, following news of fresh flare-up on the border tensions between India and China.
Market sentiment was also weak amid rising cases of coronavirus and bleak economic data that kept gains checked in global equities. Worldwide, there were 253 lakh confirmed cases and 8.50 lakh deaths from COVID-19 outbreak. Meanwhile, India reported 78,512 new COVID-19 infections, taking the death toll to 64,617 and total coronavirus cases to 36.21 lakh as of Monday.
GDP data
On the macro front, investors also awaited the release of estimates of gross domestic product (GDP) for the first quarter of this fiscal. This data will confirm the extent of damage done to the Indian economy by coronavirus pandemic and subsequent lockdowns. Most economists and rating agencies have predicted GDP contraction of 16 and 25 per cent in the April-June quarter.
"We expect the manufacturing GVA to contract by 40-45 per cent in Q1 FY2021," Aditi Nayar Principal Economist, ICRA Ltd says. ICRA expects a sharp contraction in the GVA of construction of around 45 per cent, and a contraction of 50-55 per cent in the GVA of trade, hotels, transport, communication and services related to broadcasting in the (Q1) quarter.
India-China border tensions
On August 29, a movement of 150-200 Chinese soldiers was noticed trying to change the status quo. China was setting up more camps along the Southern bank, where the clash took place. Indian Army had picked up movements and was able to thwart the Chinese advancements, said Army sources.
China's Foreign Ministry, on border dispute with India, says Chinese border troops never cross the Line of Actual Control, and that the two sides in communication regarding conditions on the ground.
As per India Today, four new camp positions have mushroomed at the Pangong Tso lake area. Earlier, there was only one at the Finger 4 area. A brigade commander level flag meeting is in progress at Chushul to resolve issues.
India-China Border: Chinese Air Force operates J-20 fighters close to LAC in Ladakh
Global markets
Asian markets were trading mostly lower despite positive cues from the US markets. Wall Street markets closed higher as investors cheered over the data that showed a 36% rise in sales of newly built homes in the US last month.
European markets were also trading lower today giving up previous gains as investors focused on US-China trade talks and key economic data release.
Analysts said investors globally stayed cautious and focussed on macro news, including PMI data, which is due across the globe. Barring China, the world's second-largest economy, all other major economies have felt the negative impact of coronavirus pandemic. The ongoing geopolitical tension between US-China will also have the impact of stock markets globally.
Change in margin and trading rules
Equities also corrected on profit booking aftermarket regulator Securities and Exchange Board of India (SEBI), said on Monday it will stick to the September 1 deadline for Market Infrastructure Institutions (MIIs) to move to the new 'pledge and re-pledge' system. SEBI had come out with the norms in February 2020, but the deadline was extended three times earlier from June 1 to August 1 and then to September 1.
Keshav Lahoti, Associate Equity Analyst, Angel Broking said, "Market corrected due to change in the margin and trading rules by SEBI and increase in tension between India and China at the border."
Technical insights
Markets fell heavily on news based movements today. On the technical front, the 50 stock barometer Nifty crossed downside mark placed near 11,400 and closed at 11,387, while Sensex, the 30 scrip index on BSE ended slightly above 38,600 mark, after hitting 40K earlier in the session.
Vinod Nair, Head of Research at Geojit Financial Services said, "With increased geopolitical tensions, markets also traded uncertainty and this could impact the market behaviour in the coming days. Investors are advised to remain cautious."
"Technically, a decline below 11,300 in Nifty would reverse the short term uptrend. In case of a rebound, it would find it difficult to cross 11500-11550 zone. We suggest using rebound to reduce longs positions and adding few shorts through options trades," said Ajit Mishra, VP - Research, Religare Broking.
Gold price rises for 2nd session; silver rates at Rs 70,000