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Home >Markets >Stock Markets >Markets skid nearly 1% as profit taking, global peers dent sentiment

Profit booking and weak global peers dragged Indian markets lower on Wednesday with benchmark indices seeing biggest single day decline since 20 May. The BSE Sensex dropped 333.93 points or 0.64% to end at 51,941.64. The Nifty was 104.75 points or 0.67% lower at 15,635.35.

Shares in major Asia-Pacific markets were mostly lower with Nikkei in Japan shedding 0.35% while South Korea’s Kospi declined 0.97%.

“Some profit booking was witnessed today across broader market ahead of the weekly expiry on Thursday," Siddhartha Khemka, Head - Retail Research, Motilal Oswal Financial Services said. According to Khemka, direction of domestic markets would depend on the monsoon, opening up of the economy in a phased manner and the pace of vaccination going forward. With many states starting to ease restrictions gradually, we expect the demand environment to improve and the unlock trade to play out well in June, he said.

The India volatility index or India VIX cooled off further by 3.10% to end at 14.75, as investors are getting less anxious with daily virus caseload declining.

“We are seeing profit-taking and it’s healthy but volatility remains high during such a corrective phase which easily unsettles the participants," Ajit Mishra, VP - Research, Religare Broking Ltd said.

However, government’s decision to provide free vaccines and food to all has made economists concerned about the fiscal burden. In response to the second covid wave, the government has announced to provide free vaccines to all adults in India from 21 June. “We estimate the associated fiscal cost works out to 0.4% of gross domestic product (GDP) and could pose upside risks to the centre's FY22 fiscal deficit estimate of 6.8% of GDP," Tanvee Gupta Jain, Economist, UBS Securities India Pvt. Ltd said.

Gupta feels that the move is in right direction, it is also imperative for the vaccine distribution plan to be laid out transparently for effective and efficient allocation of doses across states. Even as the economic revival of the country hinges on the pace of vaccination, it has slowed to 2.8 million doses per day as of the week ended 6 June from the peak of 3.6 million doses per day in the first week of April, largely on supply shortages.

Meanwhile, the Indian rupee edged higher by 9 paise to close at 72.98 against the US dollar on Wednesday.

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