Daily Market Wrap - Aug 31, 2020 - Mr. Deepak Jasani, Head of Retail Research, HDFC Securities

India's benchmark indices fell the most in over a month on news of tension between India and China on Ladakh border and ahead of the new margining system to be rolled out on Sept 01. At close the Nifty fell 284.40 points or 2.44 percent at 11363.20.

Volumes on the NSE were huge aided by the MSCI rebalancing volumes. Media, Metals, Pharma, PSU Bank stocks fell the most while Midcap index too fell ~4%. India VIX rose 27% to 23.32.

Asian markets fell Monday after opening higher as investors struggled to maintain their early momentum following another record lead from Wall Street. Profit-taking kicked in after last week's Federal Reserve-induced rise.

European stocks rose on Monday, with hopes of more accommodative measures by major central banks and upbeat service sector activity data from China helping underpin investor sentiment.

The change in margin system and securities pledge-repledging could undoubtedly bring disruptions in volumes of daily trading as there is insufficient preparation and validation by the participants in this system - viz Exchanges, Depositories, Depository participants, Clearing corp, Brokers and clients.

We could witness further polarization of stocks in the markets for some time with the top 200-300 stocks seeing the most depth and liquidity. The securities currently pledged with the brokers need to undergo the new process, which so far is not smooth going by the runs conducted so far. Hence large traders are unsure as to whether they will have limits to trade on Sept 01 which may lead to volume drop in both Cash and F&O segments that may last a few days/weeks.

The short term trend of the markets seems to have turned down.

Source : Equity Bulls

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