After Worst Weekly Loss In 4 Months, Analysts Say Markets Could Be Heading Into Consolidation

Domestic stock markets tumbled more than 2 per cent this week, following two straight weeks of gains, amid increasing COVID-19 cases around the world. Analysts say fading optimism on a fast recovery from the coronavirus pandemic and related restrictions, along with geopolitical tensions, hurt investor sentiment. A sharp selloff in banking and financial services shares weighed on benchmark indices S&P BSE Sensex and NSE Nifty 50. Globally, shares tumbled ahead of the release of US jobs data, as investors remained on the back foot to see if any sign of weakness in the world's largest economy triggers a larger selloff.

For the week ended September 4, the Sensex index shed 1,110.13 points - or 2.81 per cent - to end at 38,357.18, and the broader Nifty benchmark lost 313.75 points - or 2.69 per cent - to 11,333.85. That marked the worst week for both indices since May 8. 

Axis Bank (down 10.24 per cent), ICICI Bank (8.47 per cent), Sun Pharma (8.03 per cent) and State Bank of India (7.72 per cent) were the worst hit among the 37 laggards in the Nifty basket of 50 shares.

Top Nifty Gainers Vs Losers

On the other hand, Bharti Infratel (up 6.38 per cent), Tata Motors (3.36 per cent) and TCS (2.64 per cent) were the top percentage gainers in Nifty.

The Nifty Bank - comprising stocks of 12 major lenders in the country - crashed 2.21 per cent on Friday, a day after the Supreme Court directed banks not to declare any loans that were standard as of end-August as non-performing until further orders. That took its weekly loss to as high as 6.17 per cent. Analysts say the next court hearing, due on September 10, will be watched closely for cues.

Meanwhile, official data released in the beginning of the week showed the country's economy shrank 23.9 per cent in the quarter ended June 30, marking its worst contraction on record.

Going forward, the domestic markets may move sideways tracking global cues, say analysts.

"Uncertainties await the markets in the coming week, be it global economic data or border tensions between India and China. Indian markets have been in sync with global counterparts and will have an impact," Vinod Nair, head of research at Geojit Financial Services, told NDTV.

Data released on Friday showed employment growth in the US slowed further in August, while permanent job losses increased, raising doubts on the sustainability of recovery from the coronavirus pandemic-related disruption. 

"Markets seem to have lost momentum... and could be heading into a round of consolidation," he said. 

The Sensex and Nifty have already rallied more than 50 per cent since a coronavirus-triggered slump in global markets in March.

"Markets are facing headwinds from both domestic and global front, and indications are pointing towards a further slide ahead. The next major support exists at 11,050 (Nifty) and stiff resistance around 11,600 in case of any rebound," said Ajit Mishra, VP-research, Religare Broking.

"Since the broader indices are trading largely in tandem with the benchmark, we may see further profit-taking in mid- and small-cap segments as well."