Moreover, global markets were also trading south of the flatline as rising yield and US dollar spooked investors. Foreign investors — who have been extremely bullish on India in recent days — continued to provide support to the market.
“Two important developments are: bond yields rising in the US and the dollar index again rising above 90. Both these are negatives from the emerging market perspective, but FII inflows continue to be robust, pushing markets higher,” said VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services.
“Meanwhile the RBI in its Financial Stability Report expressed concern about high potential NPAs of the banking system which may rise above 14 per cent. PSU banks are likely to be under strain. The well capitalised large private sector banks are strong and are likely to gain from the woes of the PSU banks.”
Factors driving markets
- Vaccination to begin soon: India will soon begin the vaccination drive to inoculate 30 crore Indians, the cost of which will be burdened by the Centre.
- RBI warns of NPAs: The central bank on Monday said banks should brace for higher bad loan ratio in coming months. Macro stress tests for credit risk show that scheduled commercial banks’ Gross Non-Performing Assets ratio may increase from 7.5 per cent in September 2020 to 13.5 per cent by September 2021 under the baseline scenario
- Yields rise: Benchmark Treasury yields held firm at 10-month highs as investors adjusted for higher government spending under the Joe Biden administration, helping the dollar rebound and making gold expensive.
- Trump to be impeached again?: Investors also kept an eye on the US House of Representatives, where Democrats plan to impeach President Donald Trump after drawing up charges accusing him of inciting insurrection ahead of last week’s siege of the Capitol.
How are bluechips doing?
After opening in the red, benchmark indices remained below flatline. At 9.59 am, BSE flagship Sensex was down 106 points or 0.22 per cent at 49,163. NSE benchmark Nifty followed, slipping 11 points or 0.08 per cent to 14,473.
“The markets are feeling toppish at 14,500. While we feel the Nifty can go up to 14,600, traders should exercise caution and book profits at regular intervals. We have good support at 14,200-14,250. On an intraday basis if we can keep above 14,500, we should be able to achieve 14,600 sooner than later,” said Manish Hathiramani, proprietary index trader and technical analyst, Deen Dayal Investments.
In the 50-share pack Nifty, Tata Motors was the biggest gainer for a second straight day, up 6.23 per cent. GAIL, Eicher Motors, Tata Steel, JSW Steel, Coal India, Grasim Industries and ONGC were among other top performers.
IndusInd Bank was the top loser in the pack, down 1.73 per cent. Power Grid, Kotak Mahindra Bank, Titan, Asian Paints, Bajaj Auto, HUL, HDFC Life Insurance and Nestle were other laggards in the pack.
Broader market indices traded with gains, outperforming their headline peers in morning trade. Nifty Smallcap added 0.49 per cent while Nifty Midcap advanced 0.65 per cent. Broadest index on NSE, Nifty 500 was up 0.16 per cent.
Rashtriya Chemicals, NBCC, Thyrocare, Jindal Steel, Tata Chemicals and Canara Bank were among major gainers from the space while Mphasis, Godrej Agro, Dhani Services, RVNL, Firstsource Solution and Affle India were under selling pressure.
Japan’s Nikkei slipped 0.48 per cent, South Korea’s KOSPI fell 0.91 per cent and Hong Kong’s Hang Seng index futures lost 0.54 per cent. Defying the broader selloff, Australia’s S&P/ASX 200 rose 0.24 per cent.
On Wall Street, the Dow Jones Industrial Average fell 0.29 per cent, the S&P 500 lost 0.66 per cent and the Nasdaq Composite dropped 1.25 per cent.
What to expect
- Q3 earnings: Tata Elxsi, The Karnataka Bank, Filatex India, Steel Strips Wheels, Vikas Multicorp, HPL Electric & Power.
- Macro data: The government will release IIP and manufacturing production data for November and retail inflation data for December that will be keenly tracked by the market.