InvestorQ : What is your trading and investment outlook for the stock market on 23 Feb 2021? What explains this sharp correction?
Arti Chavan made post

What is your trading and investment outlook for the stock market on 23 Feb 2021? What explains this sharp correction?

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diksha shah answered.
2 days ago
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The Nifty and the Sensex have now corrected for 6 out of the last 7 trading sessions, not exactly an encouraging signal. On Friday, Sensex closed 1145 points lower while Nifty closed 306 points down. Sensex closed below the crucial 50,000 mark while the Nifty dipped below 14,600. Even defensive sectors like IT and Pharma were under stress.

The mid-cap and small-cap stocks did relatively better, although they were also in the negative. However, the A/D ratio indicates a market that is under breadth strain. On trigger for this fall is the sharply rising bond yields combined with fears that COVID could again surface in India in select geographies and we could have another round of lockdowns.

After a long gap, the foreign portfolio investors were net sellers on Monday. In fact, the FPIs were net sellers to the tune of Rs.893 crore even as DFIs sold Rs.920 crore on Monday, which has been the domestic funds trend. However, the FPI selling must be seen in the context that they have already infused Rs.25,000 crore into equities in Feb-21 so far.

Global markets were not all that bad except for the NASDAQ, which came under immense pressure. The NASDAQ corrected 2.5% in a single day but the Dow was marginally in the positive. In Europe, FTSE, DAX and CAC were in the negative, but only marginally. SGX Nifty is trading 25 bps higher in early trades and today could be a critical day for the trend.

One key trigger has been the sharp spike in bond yields, which has inched closer to 6.20% in the Indian markets from around 5.85% in the middle of Feb-21. That is because of the huge government borrowing program. Markets are apprehensive that government may have to pay higher yields on its bond program and indirectly spike yields further.

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