Weakness in global pairs and sky-high valuations also worried investors, further clouding the mood on Dalal Street.
After playing a tug of war for most of the session, the bears managed to outrun the bulls in the second half of the day, halting the four-day rally. The 30-pack Sensex closed 580.09 points or 1.13 percent down at 43,599.96 while its counterpart NSE Nifty fell to 12,771.70, 166.55 points down or 1.29 percent.
Investors in Dalal Street lost around 1.41 crore lakh due to the liquidation, as the market capitalization of companies listed on the BSE decreased to 170.03 crore lakh from 171.44 million lakh rupees lakh on Wednesday.
Market at a glance
- SpiceJet shares rise 12% after FAA approves return of Boeing 737 MAX aircraft
- LVB Shares Hit 20% Lower Circuit Limit for Second Consecutive Day
- Except consumer goods and media, all NSE sectors in red
- Finance Tracked by Real Estate Stocks See Massive Fall
- India VIX volatility index rises 2.35% to 19.57
- India’s economy to return to normal faster than expected, says Barclays
- Moody’s Raises India’s Growth Forecast for Fiscal Year 21 to (-) 10.6%
“The main reason behind today’s market crash is the increasing number of Covid cases in the US and Western Europe that is causing localized lockdowns, creating a dampening effect in terms of slowing the economic recovery. Furthermore, Due to the expiration of the weekly options, some volatility manifested in the market. Finally, valuations in the general market had stretched a bit after a strong rally and therefore some reserve of gains was warranted. ” said Mayuresh Joshi of William O’Neil.
Factors behind the accident
Fast growing Covid cases: Covid cases spiked once again, sparking fears of further lockdowns that could hurt economies on their way to recovery. Covid deaths in the US exceeded 250,000, supporting a series of lockdowns. Similarly, Japan also saw a record number of cases.
“Given that the underlying market strengths in the context of a steady recovery in business activities and corporate earnings are intact, any such correction should be used to position quality stocks with decent safety margins.”
Weak global signals: Global stocks were down for the third day in a row following weakness in Asia and Wall Street, as the extension of COVID-19 restrictions weighed on market sentiment. Positive news on potential vaccines had helped propel the MSCI world index to a record high earlier in the week, only to see investors back off when a number of countries announced record infection rates and stricter lockdowns.
The broad spectrum of global equities was trading 0.3% lower, while Europe’s major indices were down around 0.7%. Nikkei fell 0.4%. MSCI’s broader Asia-Pacific equity index outside of Japan fell 0.5%.
Bank stocks bleed: Banking and financial stocks alone contributed more than 400 points to Sensex’s 580-point drop on Thursday with the twins HDFC and ICICI Bank among the biggest hurdles. SBI was Sensex’s worst actor, losing nearly 5 percent.
Reserve of benefits: Some analysts believe the indices also fell prey to earnings reserve after witnessing a sharp rally since early November. During the last 13 sessions, the benchmarks have gained in all 12 except one. “In our opinion, after seeing such a sharp rebound since early November 2020, a kind of earnings reserve was expected,” said Arjun Yash Mahajan, Director of Institutional Business at Reliance Securities.
Market overview
In the 50-pack Nifty, 36 stocks closed lower, while 14 closed higher. Power Grid gained the most, 2.59%, followed by ITC, which rose 2.17%. Other winners were NTPC, Coal India and Tata Steel, which rose as much as 1.70 percent.
On the other hand, SBI had the worst performance, with a drop of 4.96 percent. ICICI Bank, Axis Bank, Tata Motors and JSW Steel were some of the biggest losers, with almost 4% each.
The overall market declined but managed to outperform the benchmark. The NSE Midcap Index lost 0.64 percent, the Nifty Smallcap 0.20 percent, while the NSE500 was down 1.05 percent.
Tata Chemicals, BEL, Future Retail, Bata India, India Cements, SpiceJet and HEG were among the top winners in the broader market, increasing from 5 to 13 percent. Federal Bank, RBL Bank, Adani Gas, CDSL, Granules India and Firstsource Solutions were among the main losers, down 4-6%.
In the sectorial space, except for Nifty FMCG and Nifty Media, which rose 0.43% and 0.26%, respectively, all other indices closed on a weak note. Nifty PSU Bank was the worst performer, down 3.10 percent. Meanwhile, Nifty Bank lost 2.85%, Nifty Realty 1.36% and Nifty IT 0.94%.
The advance-to-decline relationship tilted toward the losers with 1,436 stocks set to red and 1,322 stocks to green, while 180 stocks were unchanged. On the BSE, 171 stocks hit 52-week highs and 43 hit 52-week lows.
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