5 Reasons Why Sensex and Nifty Fell Over 1% Today

Fri, 15 Jan Closing

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Indian share markets witnessed heavy selling pressure today, pausing the record rally, with all sectors barring telecom, reeling under pressure.

Benchmark indices fell tracking weak Asian markets despite announcement of US$ 1.9 trillion stimulus package proposal from US President elect Joe Biden.

At the closing bell, the BSE Sensex stood lower by 549 points. Meanwhile, the NSE Nifty ended down by 162 points.

Tech Mahindra and HCL Tech were among the top losers today. HDFC Bank share price was in focus today, ahead of its December quarter earnings on Saturday.

SGX Nifty was trading at 14,460, down by 168 points, at the time of writing.

The BSE Mid Cap index ended down by 1.3%, and the BSE Small Cap index ended down by 1.1%.

On the sectoral front, IT stocks, realty stocks and oil & gas stocks were among the hardest hit.

Asian stock markets ended on a mixed note. As of the most recent closing prices, the Hang Seng was up 0.4% and the Shanghai Composite ended flat. The Nikkei ended down by 0.6%.

US stock futures are trading lower today indicating a negative start for Wall Street indices.

Nasdaq Futures are trading down by 22 points (down 0.1%), while Dow Futures are trading down by 83 points (down 0.3%).

The rupee is trading at 73.09 against the US$.

Gold prices are trading up by 0.2% at Rs 49,289 per 10 grams.

To know more about gold, check out our detailed article on how to invest in gold here: How to Invest in Gold?

Here are Top 5 Factors Why Indian Stock Markets Plunged Today

Weak Global Cues:

European stocks are trading on a cautious note as the prospect of tighter lockdowns in Germany and France as well as new Covid-19 restrictions in China cut into optimism about a global economic recovery.

All Sectoral Indices in Red: Barring telecom stocks, all sectoral indices witnessed huge selling pressure. IT and oil & gas stocks were among the hardest hit.

Profit Booking: Share market succumbed to profit-booking as valuation is near-record high.

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.

Retail Prices Fall Sharply in December: India's consumer price index (CPI) inflation cooled in December 2020 as prices of kitchen staples eased, and would have been much lower but for a rise in retail prices of rice, pulses and cooking oil, latest data show.

The rise in CPI in December 2020 was the slowest since September 2019 and was also below the 6% mark for the first time since March 2020.

Falling Oil Prices: Crude oil prices fell today as concerns about Chinese cities in lockdown due to coronavirus outbreaks tempered a rally driven by strong import data from the world's biggest crude importer and US plans for a large stimulus package.

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!

Speaking of the current stock market scenario, note that since the lows in March 2020, the smallcap index has gained more than 100%.

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.

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.

In news from the media sector, Den Networks was among the top buzzing stocks today.

Shares of the company jumped nearly 7% today after the firm announced robust earnings for the December quarter. The firm posted a whopping 237% rise in net profit at Rs 655 million versus Rs 193 million in the year-ago period.

Its revenue rose 8% to Rs 3.4 billion in Q3FY21 against Rs 3.2 billion in Q3FY20.

EBITDA was up 12% YoY at Rs 650 million while EBITDA margin slightly improved to 19% in Q3 from 18% in the previous year.

The company received a tax rebate of Rs 24.6 million in Q3FY21 as against a tax expense of Rs 268 million in the same quarter last year.

On the operational front, subscription revenue fell 3% YoY to Rs 2 billion in Q3.

Den Networks share price ended the day up by 2.2%.

In news from the energy sector, public sector utility GAIL today announced share buyback of 6,97,56,641 equity shares at a price of Rs 150 for an aggregate consideration of Rs 10.46 billion.

The company's board also approved payment of interim dividend for the FY 2020-21 at Rs 2.50 per equity share on the paid-up equity share capital of the company.

The record date for dividend as well as for the purpose of share buyback has been fixed at 28 January 2021.

The government has asked at least eight state-owned companies to consider share buybacks as it scours for ways of raising funds to rein in its fiscal deficit.

The firms asked to consider share buybacks include miner Coal India, power utility NTPC, and minerals producer NMDC.

GAIL share price ended the day down by 3.8%.

Moving on to news from the defence sector, leading defence company Thales on Thursday said it and state-run Bharat Dynamics (BDL) have signed an agreement to work in partnership on an air defence system with the support of the Indian and British governments.

Through the agreement, BDL will become a part of the STARStreak missile system's global supply chain, providing the opportunity for export of Indian manufactured components to this system's existing and future customers, including the UK Armed Forces, Thales said in a statement.

The "teaming agreement" was signed by Thales and BDL in the presence of UK and Indian government representatives in a virtual ceremony on January 13.

The statement quoted British Defence Minister Jeremy Quin saying that co-operation between the UK and India continues to develop at pace with much closer ties within our defence equipment programmes and systems.

The agreement will provide the opportunity for BDL to offer a ''Make in India'' STARStreak solution to the Indian government, with a capability that will match the immediate air defence needs of the Indian Army and Air force, and with 60% of the system manufactured in India.

Bharat Dynamics share price ended the day down by 1%.

Co-head of Research at Equitymaster, Tanushree Banerjee keeps a close watch on stocks in the defence space. As per Tanushree, defence will be a big wealth-creating opportunity.

Last year in June, she recorded a video about India's best defence stocks.

Tune in to the video here:

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

For information on how to pick stocks that have the potential to deliver big returns, download our special report now!

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