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BW Businessworld

Sensex Tumbles Over 1400 Points In Day's Trade On Rising Covid Cases And Lockdown In Several States

"The possibility of the pharma sector outperforming in the current market conditions is very high", Gaurav Garg of CapitalVia Global Research said to Businessworld.

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Dalal-Street went into a tailspin despite positives from Asian and other foreign markets on Monday, April 19 following the continued surge in the number of cases in the country which crossed the 2-lakh daily mark and also partial lockdowns being imposed in various states. Participants in the market were concerned with the decline in revenues from various sectors coupled with the government’s decision to restrict oxygen supply to nine industries in an attempt to divert supplies for medical use while prohibiting flow to other sectors.

The Banks and Financials weighed the sentiment majorly on Monday and led the BSE Sensex to close lower by 883 points at 47,949.42 with 28 of its constituents marking losses. Shares of IndusInd Bank, Axis Bank, Bajaj Finance were the top drags for the index as they slipped over four per cent each on selling pressure. The Nifty-50 closed at 14359.45, down by 258 points, while the Bank Nifty declined over four per cent in the day’s trade on Monday.

The losses in the equity market led the investor wealth to fall nearly Rs 4 lakh crore on Monday and it stood at Rs 201 crore, which was at Rs 205 crore at closing on Friday. The FIIs (Foreign Institutional Investors) also turned net sellers in the month of April as Covid threatened the economic recovery. FIIs offloaded shares worth $186 million in April. However, the inflows were at a peak in the past six months as they bought shares worth $26.88 billion and led the markets to scale record highs.

On the broader marker front, the BSE Midcap and Smallcap indices also declined over a per cent each as the selling pressure was widespread. Bank of India(-7.60 per cent), RBL Bank (-6.68 per cent) were the top drags in the Midcap space, while Soril Infra(-10 per cent) and Gayatri Project(-7.02 per cent) tumbled the most among the Smallcaps.

“Since March 2020, Nifty midcap and smallcap indices have maintained the rhythm of not correcting for more than average 9-10% while sustaining above their 50 days EMA, indicating robust price structure. Currently, broader market indices have undergone healthy profit booking after approaching their 52 weeks highs and corrected 7%, hauling both indices in the vicinity of their 50 days EMA, indicating temporary breather cannot be ruled out. However, such a breather should be capitalized on to accumulate quality stocks,” said ICICI Securities.

On the flipside, Pharma and IT stocks continued to outperform with investors shifting their picks as the sectors are among the top defensive sectors amid the Covid concerns in the country. Shares of Dr. Reddys Labs, Infosys, and HCL Tech were among the top index gainers at the market closing as they gained over a per cent each. HCL Technologies gained after the company signed a multi-million-dollar digital transformation and hybrid cloud contract with UD Trucks, a leading Japanese commercial vehicle solutions provider.

“The pharma sector has performed well over the last 12 months, and it may continue to perform well in the near future. The possibility of the pharma sector outperforming in the current market conditions is very high. We have seen a correction for two-and-a-half months in the sector, however, now, the pharma stocks are heading upward and some of the leading stocks like Cipla and Divi’s Laboratories are trading near all-time highs. Amidst the volatility, this sector is expected to do well,” Gaurav Garg - Capital Via Global Research Limited said to BW Businessworld.

Moving further, the markets in the short term would be guided by the COVID-19 situation in India and the response the government takes on it. Also, since the earning season has started, it will be a guiding factor for the markets. In the short term, volatility is going to be there in the market and investors should adopt a cautious approach, Garg added.

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