Sensex, Nifty crash over 3%, investors lose Rs 9 lk cr; do not buy yet, markets may fall to this level

Indian stock markets mirrored the weak global trends as BSE Sensex and Nifty 50 slumped over 3 per cent on Monday. From the record high levels, both the headline indices have now tumbled over 10 per cent.

The overall market breadth remains negative and would require strong positive triggers for changing the current negative trend.
The overall market breadth remains negative and would require strong positive triggers for changing the current negative trend.(Image: REUTERS)

Indian stock markets mirrored the weak global trends as BSE Sensex and Nifty 50 slumped over 3 per cent on Monday. From the record high levels, both the headline indices have now tumbled over 10 per cent. Analysts say that sell-off by FIIs, rising COVID-19 cases caused by new variant Omicron, and hawkish global central banks, were among top factors spooking the markets. Amid this market crash, equity investors were left poorer by Rs 9.21 lakh crore as the total market cap of BSE listed companies tanked to Rs 250.15 lakh crore from Rs 259.37 lakh crore in the previous session.

Share market downtrend confirmed

Analysts say that the lows of Friday was a ray of hope but the Nifty 50 index saw a gap-down opening on Monday’s morning which cements the validity of a downtrend. “The upside for the Nifty index is capped for the time being and every rally can be used to short this market for a target of 16400,” Manish Hathiramani, proprietary index trader and technical analyst, Deen Dayal Investments said.

Exit markets on bounce

Nifty has broken the 16800 critical support level. Monday’s breakdown opens the downside risk for the market towards the 200 day SMA which is at 16250, Rajesh Palviya, VP – Research (Head Technical & Derivatives), Axis Securities, told Financial Express Online. Palviya added that Nifty’s 16800-16600 strike has witnessed PUT unwinding which indicates more pressure ahead. However Nifty has entered the oversold zone in near-term setup which indicates some pullback. “We can see some pullback in the near term towards 16800-16900 which is likely to act as stiff resistance. One should use these pullbacks as an exit opportunity in the market,” he added.

Weakness all around

The benchmark indices have been falling due to heavy selling in global markets on account of uncontrollable Omicron outbreak. “The selling in Nifty 50 and BSE Sensex may continue till 16300-16000 and 54800-54500, respectively, in the near-term,” Ravi Singh, VP & Head of Research, ShareIndia Securities, told Financial Express Online. The fear of another lockdown or restrictions will not only hurt the already reviving economies but will increase the bottlenecks pushing the economies to several years down. “This uncertainty has led to heavy selling by FIIs in India and other emerging markets,” Ravi Singh said. Singh said that another major reason behind this unabated selling is the measures taken towards policy tightening and reducing liquidity by major central banks to curb the rising inflation.

All the sectoral as well as broader market indices were in losses as investors remain cautious due to continuous outflow of funds by FIIs. “Although the sell-off in the markets is sharp, which is not unexpected. We are witnessing profit booking at the year end due to investors’ concern over increasing inflation and potential interest rate hike,” Gaurav Garg, Head of Research at CapitalVia Global Research, told Financial Express Online.

Contra view: Should you buy the dip?

On the other hand, another analyst said that the Indian stock markets have seen the first meaningful correction in the current bull run, and this correction has completed more than 10% from highs. “Markets are in a structural bull run where every correction is a great buying opportunity,” Santosh Meena, Head of Research, Swastika Investmart, told Financial Express Online.

Among Nifty sectoral indices, Bank Nifty crashed 1,280 points or 3.6 per cent, dragged by AU Small Finance Bank, Bandhan Bank, RBL Bank, IndusInd Bank, and Federal Bank, among others, which fell up to 9 per cent.

(The recommendations in this story are by the respective research analysts and brokerage firms. Financial Express Online does not bear any responsibility for their investment advice. Capital markets investments are subject to rules and regulations. Please consult your investment advisor before investing.)

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