Sensex tanks 1,172 points in trade today; Key reasons behind the sharp fall

In Monday's early trade, the two frontline indices dropped 2 per cent each as IT major Infosys and banking giant HDFC Bank plunged sharply on disappointing Q4 performance

Equity markets have registered sharp losses over the last four sessions with the BSE Sensex tanking 1,172 points on Monday, and the Nifty50 dropping below 17,200 with a loss of 304-odd points.

In Monday's intra-day trade, the two frontline indices dropped over 2 per cent each to the day's low as IT major Infosys and banking giant HDFC Bank plunged sharply on disappointing Q4 performance.

"The sacrosanct support of '20-day EMA' is positioned at 17,450 for the Nifty, which coincides with the breakout point of the previous congestion zone. Till the time Nifty holds 17,400 – 1,200, we remain hopeful of some recovery. We hope there is no aberration on the global front in the coming days and any favorable cue would certainly be a cherry on the cake. On the upside, 17,700 followed by 17,850 are the key levels to watch out for. If the Nifty has to regain any strength, it needs to surpass these barriers with some authority," said Sameet Chavan, Chief Analyst-Technical and Derivatives, Angel One.

Global headwinds of likely aggressive rate hikes, rising inflation, and resurgence in Covid-19 cases in parts of the world also weighed on investor confidence.

"In the near-term, headwinds are getting stronger for the market. Globally, sentiments are negative with dollar index above 100, 10-year yield above 2.8 per cent and global economy expected to weaken if the Ukraine war prolongs,” said V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services,

Meanwhile, Infosys results came worse-than-expected with rising attrition and  weakening margins. With this, IT valuations may come under pressure dragging the sectoral index down, he added. 

Here are some key factors that pulled down the headline indices today:

Infosys and HDFC Bank Q4 results:  The two companies posted their q4 results over the long weekend, and investors rushed to exit the two counters on Monday amid subdued operational performance. Infosys’s PAT and margins declined sharply from last quarter and the company posted an all-time high attrition rates, while lowering its margin guidance.

Meanwhile, HDFC Bank’s net interest growth NII negatively surprised the street as the bank was confident of a pick up in NII growth. The bank’s net interest margin came 20 bps lower from last year at 4 per cent. The stock was down over 3 per cent.

Downbeat global sentiment: US stock futures were in the negative zone on Monday after a lower closing for Wall Street on Thursday as bond yields continue their run in a rising interest rate environment. On Thursday, the benchmark 10-year US bond yield rose to 2.827 per cent, its highest level since late 2018. While, domestic 10-year bond yield was also up 0.4 per cent at 7.244 per cent. 

Moreover, investors will closely monitor Fed Chair Jerome Powell’s comments as he is slated to speak at the International Monetary Fund on Thursday.

Today, Asian markets, too, have continued to trade in the red zone as China faces its worst Covid-19 outbreak since the pandemic began in 2019. The country’s business hub, Shanghai, which remains locked down, posted 22,248 new cases on Monday.

China’s first quarter GDP numbers topped estimates, however, its retail sales in March fell by a more-than-expected 3.5 per cent from a year ago, reflecting the impact of the geo-political tensions and covid restrictions.

Russia-Ukraine conflict: Prospects of resolution for the Russia-Ukraine war remain bleak as the talks between the two countries stand stalled. Ukrainian Foreign Minister Dmytro Kuleba has said that the situation in the port of Mariupol may be a "red line" in the path of negotiations, as per a Reuters report. Thus, Brent crude prices are on the rise again, trading near $113 a barrel, as the EU may impose more rigid sanctions on Russia, including its energy products.