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Indian stocks were unable to hold gains on Wednesday as uncertainty prevailed about the government’s decision on lifting the nationwide lockdown that is to end on 14 April.

The uncertainty made investors nervous and the steady increase in covid-19 related cases added to their worries.

The benchmark indices, which rose by more than 5% during the day, ended lower in a volatile session.

The BSE Sensex fell 173.25 points, or 0.58%, to 29,893.96, while the National Stock Exchange’s Nifty shed 0.49% to 8,748.75 points.

Volatile session
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Volatile session

A decline in other global markets also dented sentiment in India, as hopes of imminent covid-19 recovery faded worldwide. Markets in China, Hong Kong, and Korea fell by as much as 1%. European markets also edged lower at the time of writing.

Analysts expect the markets to remain choppy while there could be intermittent relief rallies on account of any positive news regarding covid-19.

“The Indian indices reversed their early gains tracking the muted global cues and ended with marginal losses. After a sharp run-up in the previous session, Nifty ended the day lower led by selling in a few IT, banking, and metal stocks," said Ajit Mishra, vice-president, research, Religare Broking Ltd.

However, mid and smallcap stocks outperformed the benchmark indices. BSE Midcap index rose 1.90% while BSE Smallcap index gained 1.86%.

The Indian volatility index or VIX, which tracks investors perception of markets for the next one month, increased 0.85% to end at 52.24. This indicated greater fear among investors.

High frequency data, as well as anecdotal evidence, though still limited, suggest a significant contraction in economic activity in India, according to analysts. On the domestic front, IIP (Index of Industrial Production) data for February, expected to be released on Thursday, will provide a sense of the impact of the virus-led disruption on manufacturing activity.

“Despite the policy support so far, and our expectations of more, we believe that the nationwide shutdown, and rising public anxiety about the virus are likely to lead to a sharp deterioration in economic activity in March and in the next quarter," said Goldman Sachs. It forecasts the world to be in a recession in 2020, with risks remaining on the downside. It has downgraded the GDP forecast to -1.8% in 2020, a more than 5 percentage points cut since early this year. It forecasts India’s FY21 real GDP growth at 1.6%, versus 3.3% previously but continues to expect a strong sequential recovery in H2 of the fiscal.

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