Key factors behind today's market fall
Published On: Monday, March 15, 2021 | By: Team KnowMyStock
Today (15th March 2021) the equity benchmark indices were on track for the second day of fall.The fall comes on the back of weak macroeconomic data (dip in IIP, rise in inflation) and resurgence in Covid-19 infections. Besides, elevated crude prices and jump in bond yields also weighed on sentiment. The weak macroeconomic print spooked investors who have been plowing money into the market amid hopes of a strong economic recovery. In a double whammy for the economy, industrial production growth re-entered the negative territory by contracting 1.6 percent in January, while retail inflation soared to a three-month high of 5.03 percent in February on costlier food items. That apart, WPI inflation came in at 4.17 percent in February, up 2.03 percent from January. "Looking ahead, we expect large upticks in the WPI inflation over the next three months, as the wedge between the commodity prices and their year-ago level intensifies. We expect the headline and core WPI inflation to rise
The 10-year US Treasuries yield stood at 1.634 per cent, having risen to as high as 1.642 per cent on 22nd March 2021, a high last seen in February last year. A spike in bond yields does not bode well for emerging markets like India as investors shun riskier assets in their favour.
Amid this backdrop, investors would keep an eye on US Federal Reserve's monetary policy meeting, slated for March 16-17, to understand how the US central bank plans to tackle the volatility in the bond yields.
Rising yields, a flare-up in crude prices is another worry for markets. After rising to $71 barrel last week, Brent crude was hovering close to the $70 a barrel mark amid output cuts from major producers and optimism about global economic recovery. Oil prices will continue to be closely watched as India is one of the biggest oil importers in the world.
India recorded 26,291 new Covid-19 cases today, its highest single-day spike in 85 days, taking the country's infection tally to 1,13,85,339, according to Union Health Ministry data. With 118 new fatalities, Covid-19 death toll reached 158,725, or 1.40 per cent of total confirmed infections. While the inoculation drive could soothe investors' concerns, the latest concerns surrounding the AstraZeneca vaccine and suspension of its use in some nations in Europe could prove to be a setback if authorities in India decide to follow suit. Besides, sporadic lockdowns also pose the threat to already fragile Indian economic recovery.
Asian stocks reversed gains and dipped while the US and European equity futures were mixed as liquidity concerns weighed on Chinese shares and benchmark Treasury yields traded around a one-year high. Chinese shares extended declines on concern the nation’s economic recovery portends less accommodative monetary policy, Bloomberg reported.
Japan’s Topix index rose 0.9 per cent while South Korea’s Kospi index shed 0.3 per cent and China’s CSI 300 Index fell 2.7 per cent. S&P 500 futures also declined, indicating a weak start for US markets later today.
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