Market rally loses steam over fears of extended lockdown

The weak opening of the European markets and a sharp deprecation in the rupee against the dollar weighed on stock prices.

The Indian markets posted strong gains in early Wednesday trade, with the benchmark indices adding 4 per cent to previous day’s 9-per cent gain, but the rally lost steam over fears of an extended lockdown amid rising Covid-19 cases in the country.

Also, the weak opening of the European markets and a sharp deprecation in the rupee against the dollar weighed on stock prices.

The Sensex after climbing past 31,200, settled at 29,894 — down 173.25 points, or 0.58 per cent, over the previous day’s close. The Nifty closed at 8,749, down 44 points, or 0.5 per cent, after touching an intra-day high of 9,132.

Index heavyweights, such as Hindustan Unilever, HDFC Bank, and ICICI Bank, came off sharply from their day’s highs. Overseas investors were net-buyers for the second day in a row. On Wednesday, they bought shares worth nearly Rs 1,943 crore, while domestic investors took money off the table, dumping equities worth Rs 1,758 crore. Despite foreign inflows, the rupee ended at a record low of 76.38 against a dollar, down nearly 1 per cent over Tuesday’s close of 75.63.

A day earlier, the Indian markets had logged their biggest daily jump in 11 years on optimism that the spread of the virus was deaccelerating in Europe, which had emerged as the Covid-19 hotspot after Wuhan.

The market breadth was strong for the second day in a row, with nearly two advancing stock for every one declining. The mid- and small-cap indices ended with nearly 2 per cent gain.

“Momentum indicators indicate the possibility of further upside towards 9,300-9,400. Support zone for the index is at seen at 8,500-8,700. The current upmove is broad-based and hence, expect positivity to continue for few more trading sessions,” said Sahaj Agrawal, head of research- derivatives, Kotak Securities.