Markets Update: Sensex tanks 1250 points, Nifty down 350 points—These factors pulling down the markets

Domestic equity benchmarks Nifty50 and S&P BSE Sensex corrected over 2 per cent each in the afternoon trade on Monday after Reliance Industries tanked over 4 per cent in the early trade. The Bank Nifty also corrected over 2.5%. The banking index was trading at 37,016.85, down 959 points or or 2.53%. Nifty mid cap and small cap also corrected over 3% or 900 points in the after noon trade. The fall was such that the stock market was trading near its two-month low.  

Meanwhile, the shares of the market heavyweight fell over 4% or more than Rs 110 after Reliance Industries decided to halt a stake sale in its oil-to-chemicals business (O2C) to Saudi Arabia`s Aramco, triggering the downfall.  

The shares of India`s most valuable firm traded Rs 114.75 or 4.64% lower to RS 2358 per share on BSE around 12.20 pm in Monday's intraday trade.  

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The Nifty Energy Index declined as much as 2.1%, led by losses in Reliance.  

"Reliance shares are mainly driving the indexes down," told Kshitij Purohit, senior manager at CapitalVia Global Research Limited, to Reuters.  

However, the halt in the stake sale is unlikely to impact Reliance, which has other factors working in its favour, including a sharp recovery in refining margins, a possible hike in telecom prices, and a strong retail business, according to Sumit Pokharna, VP Research at Kotak Securities.

Reliance had recently inducted Aramco Chairman Yasir Al-Rumayyan into its board amid opposition by California State Teachers` Retirement Fund. Al-Rumayyan`s appointment, initially seen as part of a process to formalise the stake sale, was later said to have no connection to the deal.

Meanwhile, a poor show by India's largest IPO so far, Paytm, was another factor triggering a downfall in the markets. Shares of Paytm fell as much as 18.16% or Rs 284.00 to Rs 1280.15 in their second day of trading despite positive Q2 data. The digital payments start-up made weak market debuts in India on Thursday.

The finance ministry notification for uniform 12 per cent GST rate on manmade fibre (MMF), yarn, fabrics and apparel have also affected footwear and apparel stocks negatively as footwear and apparels will get costly from January 1, 2022. Currently, the tax rate on MMF, MMF yarn, and MMF fabrics is 18 per cent, 12 per cent and 5 per cent, respectively.

Major auto stocks, including Tata Motors, Bharat Forge and Bosch Ltd were down over 3% each, as concerns over chip supply shortage continued, according to analysts.

Expensive valuation of Indian stocks, rise in the Covid cases across the globe were other reasons behind the sell-offs on Monday.  

Talking about the market fall, Rahul Shah, Co-Head of Research at Equitymaster, said high growth expectations have been built into the stock market valuations for quite some time now. "If these expectations don't materialise soon enough, we may see further downward pressure on prices," he said.  

He said From valuations perspective, the broader market is already quite expensive. The only thing holding it up was hopes of quick recovery in corporate earnings, said Shah. " Any delay there or any bad news on that front could lead to more downside in the offing. If your time horizon is ten years, you don't have to worry a great deal as long term India story is intact. But if it is 2-3 years, then it may be a good idea to either partially or fully exit your most profitable investments and take some money off the table," said Co-Head of Research at Equitymaster.  

Gaurav Garg, Head of Research, Capitalvia Global Research Ltd said rising inflation and fresh Covid-19 cases in different parts of the world are the major triggers behind this fall on Tuesday.  

"The BSE Sensex 30 index currently trading around 58,586. There were 4 stocks advancing against 26 stocks declining on the index. The CNX Nifty is currently trading around the level of 17487. There were 9 stocks advancing against 41 stocks declining on the Nifty index. All the sectorial indices are trading in red with auto, oil & gas, pharma, PSU bank, power, capital goods and realty down 1-2 percent. BSE mid cap and small cap indices down nearly 2 percent each. Our research suggests that the 58,200-58,500 levels may act as an important support in the market. If the market unable to sustain the same level, we can expect the selling pressure till 57900," he said. 

(Disclaimer: The views/suggestions/advices expressed here in this article are solely by investment experts. Zee Business suggests its readers to consult with their investment advisers before making any financial decision.)