Mumbai : Domestic equities opened positive on Monday, but soon witnessed selling pressure amid muted global cues, said Siddhartha Khemka, Head of Retail Research at Motilal Oswal Financial Services.
While the Sensex fell 523 points to 71,072.49 at the closing bell on Monday, the Nifty50 settled 166.45 points lower at 21,616.05.
The broader market plunged sharply with the Nifty Midcap 100 down 2.5 per cent and the Nifty Smallcap 100 down 4 per cent. The volatility index – India VIX – jumped 4 per cent to 16 levels, Khemka said.
Barring IT and pharma, all sectors ended in red. PSUs saw heavy profit booking after witnessing a sharp rally over the last few months and weak Q3 results posted by many, he added.
There was also caution ahead of domestic CPI and IIP data.
Global cues are muted as most of the Asian markets are closed for this week on account of Lunar New Year holidays, which kept global investors on the side-line.
“Overall, we expect the market to consolidate with negative bias in the near term,” Khemka said.
An uptick in exchange margin requirements caused a decrease in positions, primarily in mid and smallcaps, said Vinod Nair, Head of Research at Geojit Financial Services.
Aside from the pharma and IT sectors, selling was widespread, with notable struggles seen in PSU banks, he said.
The premium valuation gap between mid and largecaps has notched to its all-time high.
Despite a robust economic forecast, corporate earnings are expected to slow down due to moderated operating margins. It is going to be a challenge for the broad market to sustain the premium valuation. Largecaps are predicted to excel amid consolidation, he added.