This website uses cookies to collect usage information in order to offer a better browsing experience. By browsing this site or by clicking on the "ACCEPT COOKIES" button you accept our Cookie Policy.

5 Reasons Why Sensex Plunged 588 Points Today

Contributor:
Equitymaster
Visit: Equitymaster

By:

Author at Equitymaster

Extending losses to the sixth straight session, Indian share markets witnessed selling pressure during closing hours today and ended deep in the red.

At the closing bell, the BSE Sensex stood lower by 588 points. Meanwhile, the NSE Nifty ended down by 182 points.

IndusInd Bank and Sun Pharmaceuticals were among the top gainers today.

Dr Reddy’s Laboratories, on the other hand, was among the top losers today.

SGX Nifty was trading at 13,720, down by 122 points, at the time of writing.

The BSE Midcap index and the BSE Smallcap index ended lower by 0.7% and 0.3%, respectively.

On the sectoral front, telecom stocks, IT stocks and auto stocks were among the hardest hit.

US stock futures are trading lower today indicating a weak opening for Wall Street indices with the Dow Futures trading down by 284 points (down 0.9%).

The rupee is trading at 72.94 against the US$.

Gold prices are trading up by 0.8% at Rs 49,016 per 10 grams.

Here are Top 5 Factors Why Indian Stock Markets Plunged Today

Pre-Budget Nervousness: Traders were seen lightening their positions ahead of Union Budget on Monday.

Weak Global Cues: European stock markets sank at the open, extending the previous day’s heavy losses as a global sell-off gathered speed.

Asian stock markets ended deep in the red. The Hang Seng was down 0.9% and the Shanghai Composite stood lower by 0.6%. The Nikkei ended down by 1.8%.

Under pressure from global stock markets, benchmark indices also traded in the red. The BSE Sensex gave up the 46,500-level while the Nifty slipped below 13,650.

FIIs Turn Bearish: The fourth day of consecutive selling by FIIs worth Rs 37.1 billion has turned the market mood bearish.

Auto, IT, and Telecom Stocks Bleed: Losses were also widened after a sell-off in auto, IT, and telecom sectors which fell more than 2.6% each.

Profit Booking: Apart from the above, losses were also seen as share market succumbed to profit-booking.

Our editors have been pointing out for many weeks now about the risky nature of the market as Covid-19 remains an overhang and the economic outlook remains uncertain. They have been warning you about not only the market but also specific stocks and sectors.

Rahul Shah wrote about why the stock of Tata Motors could be running out of steam.

Brijesh Bhatia spoke about why it’s a good time to sell pharma stocks.

Tanushree, in her editorial, wrote about unhealthy stocks – Burger King, Westlife Development, Jubilant Foodworks, and the like.

We will keep you updated on how these factors develop in the coming days and what effect they have on Indian stock markets. Stay tuned!

Also, while the broader stock market is witnessing selling currently, the smallcap index has gained more than 100% since the lows in March 2020.

While caution is indeed warranted, Richa Agrawal, Research Analyst at Equitymaster, thinks there is still a lot more steam left to this smallcap rally.

Despite rallying more than 100% since the March 2020 lows, Richa believes small-cap stocks are set for a massive up move in 2021 and beyond.

Here’s what she wrote in a recent edition of Profit Hunter…

The P/E for smallcap index doesn’t make sense. There are thousands of listed small companies. Some have negative earnings. The base is not a valid data to work with.

That said, the closest proxy to relative valuations is the Smallcap to Sensex ratio,

Historically, this ratio has averaged 0.43x. In the previous mega runs of the smallcap index, this ratio has gone as high as 0.75x.

In January 2018, when smallcaps peaked, the ratio was at 0.58x.

Guess where this ratio is now after a 100% run up in the smallcap index?

0.38.

It’s lower than the median over 2 decades.

Smallcap to Sensex Ratio

Richa believes if you focus on the quality of business, margin of safety in valuations, and an optimum asset allocation, you are likely to create huge wealth for yourself.

Moving on to stock specific news…

Sun Pharmaceutical was among the top buzzing stocks today.

Sun Pharmaceutical Industries reported a two-fold jump in consolidated net profit at Rs 18.5 billion for the December quarter compared with Rs 9.1 billion in the same quarter last year. The numbers were aided by other income.

Other income for the quarter surged to Rs 3.1 billion compared with Rs 1.1 billion in the year-ago quarter.

Revenue for the quarter rose 9.2% YoY to Rs 87.8 billion from Rs 80.3 billion in the same quarter last year.

The company board also declared an interim dividend of Rs 5.50 per share. The record date fixed for the purpose of ascertaining the entitlement is February 10.

Colgate-Palmolive (India) share price was also in focus today. The stock of the company witnessed buying after the company reported a double-digit year on year (YoY) growth of 10.1% in domestic sales for the quarter ended December 2020 (Q3FY21).

The stock was trading close to its all-time high level of Rs 1,676, touched on January 11, 2021.

The company’s reported net sales, including export, grew 7.8% YoY at Rs 12.2 billion in Q3FY21. Net profit during the quarter under review jumped 24.7% YoY at Rs 2.4 billion as against Rs 1.9 billion for the same quarter of the previous year.

The growth was largely driven by volumes given the company has significantly increased its marketing spends behind brand building and promotions.

Given the sharp decline in commodity cost, gross margins expanded by 420 basis points (bps) while EBITDA (earnings before interest, taxes, depreciation, and amortization) margins went up by 250 bps over the previous year quarter.

Economic Survey Pegs FY22 Growth at 11%

In news from the macroeconomic space, Nirmala Sitharaman has tabled the Economic Survey 2020-21 in the Lok Sabha today.

As per the survey, gross domestic product (GDP) growth is seen expanding by 11% in the 2021-22 fiscal. The gross domestic product (GDP) contracted by a record 23.9% in April-June and by 7.5% in the second quarter. For the full fiscal year 2020-21, the survey anticipated a GDP contraction of 7.7%.

As per the survey, the economy, which was battered by the coronavirus lockdown, is expected to see a strong recovery in the 2021-22 fiscal year.

India’s real GDP is expected to grow by 11% in FY22, making it one of the world’s fastest growing economies in the aftermath of the COVID-19 pandemic, said the Economic Survey 2020-21 tabled in Parliament on January 29.

For the first half of FY22, the RBI had expected a real GDP growth rate of 14.2%.

The survey stated that economic scars that the Indian economy is currently having to cope with run rather deep and are challenging. For the first time, there was de-growth. The economy is technically in a recession having been witness to a contraction in the GDP for the last two consecutive quarters.

Experts hope the attempt to assess the health of the Indian economy and measures required to revive it will not just look at ways to rebound from the de-growth but also come up with big ideas.

There may also be sections devoted to agriculture reforms, health care, banking and the MSMEs (Micro Small & Medium Enterprises).

We will keep you updated on all the upcoming announcements and developments from this space. Stay tuned.

To know what’s moving the Indian stock markets today, check out the most recent share market updates here.

Disclosure: Equitymaster

LEGAL DISCLAIMER: Copyright © Equitymaster Agora Research Private Limited (Research Analyst) bearing SEBI Registration No. INH000000537. Equitymaster is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one’s own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA, Canada or the European Union countries, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an ‘As Is’ basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here.

Disclosure: Interactive Brokers

Information posted on IBKR Traders’ Insight that is provided by third-parties and not by Interactive Brokers does NOT constitute a recommendation by Interactive Brokers that you should contract for the services of that third party. Third-party participants who contribute to IBKR Traders’ Insight are independent of Interactive Brokers and Interactive Brokers does not make any representations or warranties concerning the services offered, their past or future performance, or the accuracy of the information provided by the third party. Past performance is no guarantee of future results.

This material is from Equitymaster and is being posted with permission from Equitymaster. The views expressed in this material are solely those of the author and/or Equitymaster and IBKR is not endorsing or recommending any investment or trading discussed in the material. This material is not and should not be construed as an offer to sell or the solicitation of an offer to buy any security. To the extent that this material discusses general market activity, industry or sector trends or other broad based economic or political conditions, it should not be construed as research or investment advice. To the extent that it includes references to specific securities, commodities, currencies, or other instruments, those references do not constitute a recommendation to buy, sell or hold such security. This material does not and is not intended to take into account the particular financial conditions, investment objectives or requirements of individual customers. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.

In accordance with EU regulation: The statements in this document shall not be considered as an objective or independent explanation of the matters. Please note that this document (a) has not been prepared in accordance with legal requirements designed to promote the independence of investment research, and (b) is not subject to any prohibition on dealing ahead of the dissemination or publication of investment research.

Any trading symbols displayed are for illustrative purposes only and are not intended to portray recommendations.

Disclosure: Forex

There is a substantial risk of loss in foreign exchange trading. The settlement date of foreign exchange trades can vary due to time zone differences and bank holidays. When trading across foreign exchange markets, this may necessitate borrowing funds to settle foreign exchange trades. The interest rate on borrowed funds must be considered when computing the cost of trades across multiple markets.

Disclosure: Futures Trading

Futures are not suitable for all investors. The amount you may lose may be greater than your initial investment. Before trading futures, please read the CFTC Risk Disclosure. A copy and additional information are available at ibkr.com.

trading top