A record jump in the Covid-19 cases in the country which led to lockdown-like restrictions in the economically important state of Maharashtra spooked investors on Monday. Besides, a weak PMI manufacturing print for March added fuel to the fire, raising concerns about the pace and strength of the economic recovery.
Growth in manufacturing activities slowed to the lowest rate in seven months as increasing Covid cases hit demand. PMI fell from 57.5 in February to 55.4 in the previous month.
Against this backdrop, the frontline S&P BSE Sensex dropped 1,449 points in the intra-day deals to hit a low of 48,581 amid heavy selling in banking, financial services, and realty counters. However, a sharp rally in the IT stocks ahead of the March quarter results gave investors some solace and the index ended 870.5 points, or 1.74 per cent, down at 49,159 levels.
On the NSE, the Nifty50 index recovered 179 points from the day's low level of 14,459, and settled at 14,638 levels, down 229 points or 1.5 per cent.
Bajaj Finance, IndusInd Bank, State Bank of India, M&M, Axis Bank, Bajaj Auto, ICICI Bank, ITC, HDFC, and Bajaj Finserv tanked between 3 per cent and 6 per cent, while other heavyweights like RIL, L&T, and HDFC Bank slipped up to 2.5 per cent.
Pain in the broader market, however, was lesser relative to benchmarks as the S&P BSE MidCap and SmallCap indices closed 1.13 per cent and 1 per cent down, respectively.
Therefore, the overall market breadth on the BSE was in the ratio of 1:2 with two stocks falling against every stock that rose, compared with a 1:4 ratio on the 30-share index.
Given this, analysts say investors should utilise the crash to look at investment-worthy opportunities and buy from a medium-to-long perspective. They, however, caution that the markets are likely to be on a roller-coaster ride all through April given the slew of events stacked up ahead.
Sectorally, the Nifty PSU Bank index declined 4 per cent on the NSE, while the Nifty Bank, Private Bank, Financial services indices slipped up to 3.5 per cent.
The headline pro forma gross NPAs and net NPAs reported by banks do not reflect the underlying stress on the asset quality of banks as the quantum of loans in the overdue categories has increased post the moratorium period and this will lead to a rise in non-performing assets of the banks.
Rating agency Icra expects asset quality pressure for banks to resurface after the impact of the relief measures by the government and the regulator wanes off. It has estimated that the gross NPAs (excluding write-offs) will rise to 9.6-9.7 per cent by March 31, 2021 and 9.9-10.2 per cent by March 31, 2022 from 8.6 per cent as of March 31, 2020.
On the contrary, the Nifty IT index jumped over 2 per cent and the Nifty Metal index gained 1 per cent in a weak market on the back of strong earnings expectations and solid global cues, respectively.
Individually, shares of Infosys hit a fresh record high of Rs 1,425 after rising nearly 3 per cent on the BSE in intra-day trade on Monday, which propelled the company's market capitalisation to Rs 6.01 trillion-mark. The stock surpassed its previous high of Rs 1,406, touched on March 16, 2021.
Besides Infosys, HCL Tech, TCS, and Wipro gained up to 3 per cent.
In the metals pack, SAIL, Hindustan Zinc, Jindal Steel, Adani Enterprises, and JSW Steel were up in the range of 2 per cent to 7 per cent.
Stock prices rose to a 1 1/2-month high on Monday after data showed a surge in US employment while US bonds came under pressure on worries the Federal Reserve may bump up interest rates sooner than it has indicated.
In Asia, Japan's Nikkei rose 0.8 per cent while MSCI's broadest index of Asia-Pacific shares outside Japan slipped slightly, with China closed for Tomb-Sweeping day and Australia and Europe on Easter Monday.