Panic in stock markets: Sensex in tailspin, Nifty may sink below 10,000

Boiling crude oil prices and plunging rupee have brought out the bears. In its second-biggest single-day fall this year, BSE Sensex shed 806 points, or 2.24%, on Thursday to close at 35169.16, its lowest reading since July 2. The index hit a low of 889 points during the day.

Nifty tumbled 259 points, or 2.39%, to touch 10599. The 50-share index hit a low of 10547.25 during the session.

In the last two days, Sensex has lost 1,356,98 points, wiping out more than Rs 5 lakh crore of investor wealth. Both the indices have lost around 10% from August, when they hit their lifetime highs.

Tyre, paint and chemical stocks led the plunge as the 19 sub-sectoral indices on BSE ended negative.

“In 2018, Nifty had touched a low of 9998.05. There is a high probability that the index will go back to this level. I do not see any near-term recovery happening, rather there will be more deep correction,” said A K Prabhakar, head of research at IDBI Capital. “A lot depends on the RBI decision now. But there is not much that they can do,” Prabhakar said. The central bank is scheduled to announce its monetary policy today.

People right now are taking the money from the table and putting in safer options like fixed deposits, he said.

Among sector indices, BSE Energy fell the most 6.66%, followed by Oil & Gas (-6.58%), Information Technology (-3.28%), Healthcare (-3.02%) and Teck (-2.97%) were the other worst performing sectors.

The BSE Midcap and Smallcap indices also ended negative tanking 1.93% and 2.07%, respectively.

Analysts are also seeing sector rotation with currently winning stocks losing out and others coming into favour. “When this kind of plunge happens, there is definitely a stock and sector rotation,” Devang Mehta, head of equity advisory, Centrum Wealth Management, said.

The strongest of businesses and the bluest of blue chips have cracked in the last couple of sessions, which highlights the prevailing negative sentiment and an environment of pessimism, he said. The rupee on Thursday touched a historic low of 73.82 against the US dollar, closing at 73.58/$, a drop of 24 paise over the previous close.

“The currency has been hit by the double whammy of external risk aversion amid evolving global idiosyncrasies and oil prices soaring above $85/barrel. The government so far has treaded slowly and cautiously on the rupee management. The policy steps taken by the government have not been necessarily too effective in managing immediate dollar demand,” Madhavi Arora, economist, Fx and rates-Edelweiss Securities, wrote in a note. “Continued pressure on the currency will, however, see a renewed market clamour for further policy steps to contain pressure on the rupee,” she said.

“Anxieties over RBI adopting an aggressive stance in its monetary policy due to a rise in inflationary pressure led to an erosion in investors’ risk appetite. With deteriorating macros, all eyes will now be on the second quarter earnings and how the current liquidity situation is addressed,” Mehta said.

Technical charts, too, suggest further drop. “The market is falling for the fifth week now. Nifty has made a lower-high and lower-low in the charts. It has corrected 1100 points so far now. There is a chance that it might go down to 10400-10350 level,” Chandan Taparia, derivatives and technical analyst at Motilal Oswal Financial Services, said.

He sees 4-5% more correction in oil firms’ stocks, which were mauled after the government cut fuel prices.

Reliance Industries, Hero MotoCorp, TCS, Adani Ports and ONGC were the biggest laggards among the Sensex pack, falling as much as 7.03%.  Foreign institutional investors sold shares worth Rs 2,760 crore on Thursday while the domestic institutional investors  bought shares of Rs 1,823.59 crore on a net basis.

Source: DNA Money