BSE Sensex, Nifty50 tank: The Indian equity markets are in the midst of a bull run, but Dalal Street saw heavy selloff today as investors booked profits to cash in on the recent stock market rally. After hitting lifetime highs in trade on Wednesday, both the benchmark indices fell sharply in afternoon trade, with Sensex plunging over 900 points and Nifty below 21,200.
Sensex, after reaching a fresh record peak near the 72,000 level, experienced a significant drop and fell over 1,000 points from the day’s high, while the Nifty also tumbled nearly 300 points from its peak as traders decided to book profits.
BSE Sensex closed the day at 70,506.31, down 930 points or 1.30%. Nifty50 was down over 200 points or 1.41% at 21,150. While BSE Sensex hit an intraday high of 71,913, Nifty50 saw a high of 21,593.
The Nifty Midcap and Nifty Smallcap indices plunged by over 3%, marking a significant decline. All sectoral indices closed in negative territory, especially in the auto, media, metal, PSU banks, and realty sectors. Adani Ports and Adani Enterprises saw a loss of around 6% each, while Tata Steel experienced a 5% decline. SBI and Tata Motors both fell by 3%, while RIL observed a loss of over 1%.
Reliance Power closed 10% lower, with IRFC and IRCTC seeing a downturn of around 7-8%. YES Bank and Vodafone Idea also faced losses of 6-7%.
With the exception of HDFC Bank, all 30 shares in Sensex closed negatively. Other notable decliners included NTPC, Tata Motors, HCL Technologies, Mahindra & Mahindra, State Bank of India, Power Grid, Tech Mahindra, Larsen & Toubro, and JSW Steel.
Markets had been on a record-setting spree, entering an overbought zone, so it was anticipated that profit-taking would emerge, which materialized today, stated Prashanth Tapse of Mehta Equities.
Today’s decline in the Nifty marks the biggest single-day loss in percentage terms since October 26. In the last month alone, the index has surged over 1,500 points or about 7.6%, making November the best month for Nifty in 2023.
Why is the stock market crashing today?
Valuation parameters and technical indicators have been indicating a consolidation ahead after a continuous rally in the past few days. Historical data shows that December has seen corrections or consolidations following positive run-ups during the lead period.
According to an ET report, market participants are also keeping an eye on the rising cases of the Covid sub-variant JN.1 in India. Kerala reported 292 new active cases of COVID-19 and 3 deaths yesterday. Union Health Minister Mansukh Mandaviya emphasized the need to be alert against emerging strains of coronavirus and reviewed the preparedness of health facilities. However, even the pharma index fell over 1%.
The sudden change in market sentiment caught participants by surprise, as all global and domestic cues had been positive. Japan’s Nikkei 225 was trading higher by 1.5%, while London’s FTSE 100 was up 1%. The US 10-year and 2-year bond yields fell over 100 bps each, and Brent crude oil prices were still trading below the $80 level.
Anand James, Chief Market Strategist at Geojit Financial Services, stated that in the eve of last elections, the first 10 days of December saw declines helping the subsequent push higher in the next 10 days followed by consolidation in the rest of December as well as till the beginning of March.
Market experts warn of a possible bubble building up in the smallcap space. PMS fund manager Siddhartha Bhaiya has temporarily suspended the inflow of funds into domestic PMS and AIF funds due to concerns about valuations and a building bubble in the IPO and SME markets.
The consensus view on Dalal Street is that largecap stocks offer a better reward-risk balance with more reasonable valuations compared to the lofty valuations of most mid- and small-cap stocks.
