Sensex tanks 5% in a week ahead of Union Budget 2021

• Follow

Benchmark equity indices BSE Sensex and NSE Nifty witnessed a sharp fall for the week ended January 29. The mood in the market was fragile as investors became wary of risks due to upcoming budget and heavy selling by FIIs.

Index Movement:

Sensex fell 2,592 points or 5.30% to settle at 46,285. Whereas the Nifty50 dropped 5.1% or 737 points to close the week at 13,634.

While the BSE Mid-Cap index ended at 18,082 after falling 679 points or 3.62%, and the BSE Small-Cap index plunged 433 points or 2.36% to end at 17,988.

It is important to note that foreign portfolio investors (FPIs) have been selling for the last five sessions and have taken off more than Rs 12,000 crore from the Indian market.

“The fall in the last four trading sessions was because of two-three basic reasons. One, the market has run up quite a lot in the last nine or ten months or so, we have witnessed a huge amount of FII buying coming in. So one there was profit booking from FII side. Two we have a major event, that’s budget on Monday, and a lot of short term traders decided to keep their positions low or book profits before the event. Three, some of the hedge funds have been selling in the Indian markets just because of their issues with the GameStop valuation going on, and never going down. So they have been stuck with that. And for that reason, some of the hedge funds have been selling in the markets. The basic premise is the undertone is still bullish. And we were all waiting for a correction and whatever be the reason be the budget or profit booking, this is a good opportunity to get into strong stocks. There might be some amount of volatility on budget day and the day following, but I think after that things would be normal,” Rajesh Agarwal, Head Research, AUM Capital.

Economy

The International Monetary Fund (IMF) on Tuesday revised its growth forecast upwards for the Indian economy to 11.5% in 2021, making it the only major economy expected to register a double-digit growth amidst the COVID-19 pandemic.

The Economic Survey 2020-21, tabled by Finance Minister Nirmala Sitharaman in the parliament on Friday estimates India’s GDP to contract by 7.7% in FY2020-21, composed of a sharp 15.7% decline in the first half and a modest 0.1% fall in the second half.

In the year 2021-22, a sharp recovery of real GDP growth of 10-12% is expected based on a low base effect and inherent strengths of the economy.

The Indian government may need to continue with an expansionary fiscal stance to sustain the recovery in aggregate demand, said the Economic Survey for 2020-21.

The survey further said that the soon-to-conclude financial year is likely to see a fiscal slippage and added that the expenditure support provided during the year will impart the required momentum to mid-term growth.

Global Markets

Amid the pandemic, China surpassed the U.S. as the world largest recipient of FDI, according to a report released by the United Nations Conference on Trade and Development. China brought in $163 billion inflows last year, compared to $134 billion attracted by the U.S.

Japan’s industrial output extended declines in December as factories struggled with a hit of demand from expanded COVID-19 lockdown measures globally. Official data released on Friday showed factory output declined 1.6% in December.

The U.S. Federal Reserve left its benchmark interest rate anchored near zero following the conclusion of its two-day meeting Wednesday. The Fed also said it will keep buying at least $120 billion of bonds a month.

In his post-meeting news conference, US Federal Reserve Chairman Jerome Powell said that the U.S. economy was a long way from full recovery and still short of policymakers inflation & job goals. The central banker made it clear that the U.S. central bank was nowhere near exiting massive support for the economy during the ongoing coronavirus pandemic, as officials left their benchmark interest rate unchanged near zero.

With inputs from Capital Market – Live News