Motilal Oswal says that Indian equity market opened positive yet again but soon after a range bound move in the initial hour, it saw a steep fall again. Nifty plunged 163 points (-1.1%) to close at 14,558, while Sensex fell 585 points (-1.2%) to end at 49,217. The broader markets too fell with Nifty MidCap 100/Nifty SmallCap 100 down -1.4%/-1.3%. Except FMCG (+0.1%) and Metals (+0.04%), rest all the sectors ended in red with IT (-3.1%) and Pharma (-2.3%) being the biggest losers. Banks, Realty and Energy fell 1-2% while Infra, Auto and Financials fell less than 1%. India VIX continued to fall marginally by 0.4% to 20.1 levels.
 
Global cues were positive early morning led by a significantly positive outlook for the US Economy by the Fed, and pledged to keep the interest rate near zero. Infact, the US Federal Reserve projected the US economy to grow by 6.5% in 2021 - the largest annual output growth since 1984. However, the global markets could not sustain the gains, and came off later as the US 10-year yield recorded a steep uptick of 5% - hitting its highest level in over a year.
 

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On the domestic side, Nifty ended in deep red, giving up all intraday gains – thus falling for the fifth straight session. A single-day increase of over 35,800 Covid-19 cases in India, the highest since December 6, 2020, made the market nervous. The Indian market has been in a corrective phase for the past 10 days, due to factors like high bond yields in the US, a slew of QIPs and IPOs taking away liquidity from the system and increased no of covid cases being reported across the country.
 
Technically, Nifty formed a strong Bearish candle on daily scale and continued its weakness for the fifth consecutive session with formation of lower highs from the last four trading sessions. Now, till it remains below 14700, weakness could be seen towards 14450-14300 while on the upside hurdles shift lower to 14800-14900. Decline in VIX even after a market fall of 200 points is not giving any immediate clues.
 
The market may remain dull over in the near term as it continues to face some hurdles due to concerns over the bond yields, commodity prices and risk of increase in inflation. In addition, resurgence of covid cases in India continues to worry the market and may keep the market under pressure till it subsides. Investors would react to the BoE MPC outcome tomorrow while IT stocks will be action post the stellar results announced by Accenture. Given the likelihood of high volatility continuing in the market for some time, investors would do well by accumulating good quality companies on decline in the market.