Elections, rising global COVID cases, and F&O expiry keep markets jittery — but experts believe ‘correction has not begun yet’

• Sensex plunged nearly 600 points, while the Nifty crashed 1.34% to close at 11,729.60 points at the end of trading on Wednesday (October 28).
• Rising COVID cases globally have kept markets under pressure. US presidential elections, as well as assembly elections in Bihar, are another factor.
• Market experts, however, believe that the correction has not begun yet in Indian equity markets.

The Indian stock-market indices have fared better compared to its global peers so far this month. But today, Sensex plunged nearly 600 points, while the Nifty crashed 1.34% to close at 11,729.60 points. The sell-off was led by banking and metal stocks.

India vs global markets

Stock market index	Performance since October 1
Dow Jones Industrial Average	-1.27%
S&P 500	0.29%
DAX Performance Index	9%
SSE Composite Index	-0.08%
Sensex	3.17%

The market had been holding up despite weak cues from global markets — US elections, stimulus package concerns, and rising COVID-19 cases in Europe. Back home, assembly elections are underway in Bihar, and the October series F&O expiry kept the markets jittery. Market experts, however, believe that the ‘correction has not begun yet.’

“We broke the levels of 11700 and briefly visited 11684, which is around the lower end of the range, but we bounced back to close above 11700. These are crucial times for trading as a break of 11650 could trigger a fresh wave of shorts which could take the markets down to 11400-11450,” said Manish Hathiramani, proprietary index trader and technical analyst, Deen Dayal Investments.

Here’s why Sensex witnessed 600 point sell-off in trade today.

What led to the sharp fall?

• Weak global cues amid a resurgence of coronavirus cases in Europe, slow progress on vaccines
  

Indices across Asia felt the pain in trade today as concerns over US stimulus kept investors jittery. Indian indices fell the most amongst emerging Asian markets today. Bourses in Hong Kong and Tokyo ended in the red, while Shanghai and Seoul were in the positive territory. Although the coronavirus pandemic has shown a declining trend in India — some of the major European countries are witnessing the second wave of coronavirus.

According to Paras Bothra, President of Equity Research, Ashika Stock Broking, “Uncertainty with regards to the second wave of a virus and setbacks to some of the covid vaccines are the biggest risks for the market.”

• US presidential elections and Bihar assembly elections in the spotlight
  

The ongoing elections in the US will decide the leader of the world’s largest economy. As the US elections inch closer to the November 3 deadline, the uncertainty continues to loom among the investors.

According to Keshav Lahoti, Associate Equity Analyst at Angel Broking, “the volatility is expected to continue in the market on the eye of key events of the US election.”

And, back home, Bihar is the first state to go to polls amidst this pandemic. Polling for the first phase of elections in Bihar’s assembly elections gathered momentum. At 3 pm, the Election Commission had registered 46.29% voting in 16 districts.

• F&O expiry jitters
  

The volatility in the market was also due to profit-booking ahead of the monthly F&O Expiry tomorrow. An expiration date in derivatives is the last day that derivative contracts, such as options or futures, are valid.

Analysts believe ‘correction has not begun yet’

While analysts remain bullish on the long term prospects of the Indian market, they expect the coming next few weeks are crucial — given the surging Covid cases in Europe, impasse over the second US stimulus bill, and the very important US Presidential elections in November.

“I would not term this as a correction as I do not feel a correction has begun. We will consider the beginning of a corrective move when we break the level of 11650. From that point, we could witness a short term pit stop at about 11450, where lies the next support level. Investor sentiments continue to remain bullish,” said Hathiramani.

Jyoti Roy, Equity Strategist at Angel Broking, also said it would not be correct to state that markets are witnessing a correction as the Nifty is trading at a level of around 12,000, which is very close to its all-time highs. He believes that further upmove from current levels will be dependent upon positive news flows on the vaccine front along with the positive outcome of other key events.

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