Just after India beat Hong Kong to become the world’s fourth largest stock market, the Sensex fell over 1,000 points to end at 70,371, while the Nifty also cracked 1.5% to end below the 21,250 mark. The sell-off was deeper in the broader market with mid and smallcap indices slipping around 3%. In the process, Dalal Street investors lost about Rs 8 lakh crore as the market capitalisation of all BSE-listed stocks fell to Rs 366.3 lakh crore.
Defying positive momentum seen in global markets, banks, oil and gas stocks, FMCG and metals led the downside, while buying was seen in pharma stocks.
RIL and HDFC Bank alone contributed to about half of the loss in Nifty.
Also read: India crowned stock market superpower but 2 Wall Street darlings bigger than entire Dalal Street
“Tensions in West Asia and the Red Sea are areas of serious concern. If something goes wrong, the market will be impacted since valuations are high. Therefore, even when optimistic, investors should be cautious,” said Dr V K Vijayakumar, Chief Investment Strategist, Geojit Financial Services.
Here are 6 factors behind today’s fall in Sensex, Nifty:
1) HDFC Bank
The heavyweight counter was alone responsible for about 1/3rd of today’s loss as HDFC Bank shares dropped another 3% as investors were not willing to buy the dip that began in the aftermath of the disappointment that came from the December quarter results.Not just HDFC Bank, but Nifty Bank too fell 2%, with IDFC First Bank shares falling 6.5% followed by IndusInd Bank, PNB, AU Small Finance Bank, and SBI.
2) RIL
Shares of India’s most valued company Reliance Industries (RIL) fell 2% and was the second biggest contributor in today’s fall. Global brokerage Citi has downgraded the stock to neutral rating with a target price of Rs 2,910 saying that RIL’s recent outperformance makes risk/reward more balanced. Its Q3 results were broadly in-line.
Selling pressure was witnessed in other oil and gas stocks too with IOC, HPCL, Adani Total Gas, Oil India, ONGC, and BPCL cracking in between 4-6%.
3) Sebi stance on ownership norms
Markets regulator Sebi may impose tightened ultimate beneficial ownership norms for overseas investors with effect from February 1 despite pressure from foreign banks and a section of offshore fund managers to ease the rules ahead of the deadline, ET reported today. According to unofficial estimates, there could be a sell-off in Indian stocks in the range of Rs 1.5 lakh crore to Rs 2 lakh crore over the next six months by funds unable to comply with the norms.
Also read: Sebi firm on FPI ownership norms as deadline looms
4) FIIs
After buying in the last two months, FIIs have been net sellers in Indian stocks to the tune of over Rs 13,000 crore so far in the month. Domestic institutions, led by MFs, have been trying to absorb the sell-off.
5) Profit-booking
Analysts have long been warning against many stocks, across sectors, going into overbought zones, given the unwavering commitment shown by retail investors in buying stocks without giving much thought to valuations.
In the last 3 months, Nifty is up around 9%, while mid and smallcap indices have rallied around 17%.
6) Technical tension
On the weekly scale, Nifty saw the emergence of an engulfing scenario, with price submerging major portions of the previous week’s move. “This reveals selling pressure, which may persist in the upcoming sessions. While the fragile bias continues to haunt Nifty around the 22,000 mark, the support area of 21,500 -21,450 keeps the underlying momentum upbeat, Nuvama said.
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(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)
