4 Reasons Why Sensex Plunged 634 Points Today

Thu, 20 Jan Closing

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Indian share markets witnessed negative trading activity throughout the day today and ended on a weak note.

Benchmark indices witnessed selling pressure for a third straight day on the back of rising US bond yields, FII selling, soaring oil prices, and concerns over inflation.

At the closing bell, the BSE Sensex stood lower by 634 points (down 1.1%).

Meanwhile, the NSE Nifty closed lower by 181 points (down 1%).

Power Grid Corp and Bharti Airtel were among the top gainers today.

Bajaj Finserv and Bajaj Auto, on the other hand, were among the top losers today.

The SGX Nifty was trading at 17,804, down by 174 points, at the time of writing.

The BSE Mid Cap index ended down by 0.1%, while the BSE Small Cap index ended up by 0.1%.

Sectoral indices ended on a negative note with stocks in the IT sector, energy sector and healthcare sector witnessing most of the selling pressure.

Power stocks, on the other hand, witnessed buying interest.

Shares of Bharat Dynamics and Minda Corporation hit their respective 52-week highs today.

Asian stock markets ended on a mixed note today.

The Hang Seng ended up by 3.4%, while the Shanghai Composite ended down by 0.1%. The Nikkei ended up by 1.1% in today's session.

US stock futures are trading on a positive note today with the Dow Futures trading up by 109 points.

The rupee is trading at 74.50 against the US$.

Gold prices for the latest contract on MCX are trading up by 0.1% at Rs 48,418 per 10 grams.

Here are 4 Factors Behind the Market Fall

Omicron threat: While the daily coronavirus caseload in cities such as Mumbai and Delhi are showing a slight dip, nationally, the count continues to be high.

India reported more than 300,000 cases, its highest tally since May 2021, in the last 24 hours.

The rise in cases suggests that restrictions imposed by state governments are likely to continue for some time and may hamper economic activity in the near term.

Patchy earnings: With the December quarter earnings season in full swing, investors have not had much to cheer for except the odd breakthrough performance.

Most companies that have reported their earnings have either met expectations or missed them with a few surpassing estimates by a substantial mark.

Paints maker Asian Paints today said its consolidated net profit dipped 18% in the December 2022 quarter. While, Bajaj Auto on Wednesday said its standalone net profits for the quarter ended December 2021 declined 22%.

Surging bond yields: The sharp surge in global government bond yields led by the US treasury bonds this week has brought a reckoning for investors, who had gotten used to abundant liquidity driving share prices higher.

The rise in bond yields has forced investors to recalibrate their optimism for growth and shift funds towards less risky assets.

The rise in bond yields has come as the US Federal Reserve is expected to raise interest rates three times in 2022, with the first expected in March.

FPI selling: The surge in global bond yields and a spike in volatility forced foreign portfolio investors (FPIs) to trim their exposure on India.

After a brief pause in the first week of January, foreign investors resumed their selling activity. FPIs have been net sellers of Indian shares for five previous sessions.

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!

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In news from the paints sector, Asian Paints was among the top buzzing stocks today.

Asian Paints reported a consolidated profit after tax (PAT) of Rs 10.2 bn for the quarter ended December 2021, down 18% from Rs 12.4 bn in the year-ago quarter.

The profit grew 70% from Rs 6 bn in the previous quarter.

Consolidated revenue of India's largest player in the decorative paints segment was 26% higher at Rs 85.3 bn from Rs 67.9 bn in the third quarter of the financial year 2022. Revenue in the September quarter was Rs 71 bn.

Amit Syngle, Managing Director & CEO, said,

• The steep and unprecedented inflationary trend in raw material prices continued to impact the gross margins across businesses this quarter.
  
  Substantial price increases have been taken in November and December to mitigate this inflation impact, improving the margins on a sequential basis.

The growth in revenue was backed by the gain in market share from unorganised players, price increases coupled with dealer up-stocking and strong growth momentum in ancillary businesses of waterproofing and wood finish.

The consolidated revenues from paints business grew 25% YoY to Rs 83.2 bn compared to Rs 66.4 bn in the same quarter a year ago. On a sequential basis the revenues of paints business grew 21% from Rs 69 bn.

Strong double digit growth was also witnessed in the Industrial Coatings business backed by strong performance by the protective coatings segment.

However, the challenges faced by the automotive industry had their impact on the automotive coatings vertical which witnessed a subdued quarter yet again.

Increase in discretionary spending by the consumers enabled healthy growth in the company's home improvement business as the company expanded its footprint to more regions across the country.

Asian Paints share price ended the day up by 0.6% on the BSE.

Moving on to news from the IT sector...

HCL Tech Expands Digital Transformation Partnership with ams Osram

IT Company HCL Technologies (HCL) has expanded its strategic transformation partnership with ams Osram to digitise one of the optical solutions leader's key business processes and drive enterprise resource planning and customer relationship management systems standardization across the organization.

HCL will also continue to lead IT infrastructure operations integration for the client.

The partnership will enable greater maturity in ams Osram's digital execution capabilities and drive global IT operations excellence by increasing agility and scalability to accelerate innovation, HCL Tech said in a statement.

To enable this, HCL said it will develop and operate a modern digital foundation through data center, hybrid cloud and network transformation.

It will also enhance the end-user experience through increased use of artificial intelligence (AI), automation and self-service capabilities, IT service management, process modernization, and service integration and management.

Osram's post-merger mission is to become the uncontested leader in optical solutions by fostering innovation through intelligent technology that enables customers in the consumer durables, mobility, industrial, and healthcare sector.

HCL's extensive capabilities in managing complex, hybrid technology environments and its proven FENIX 2.0 digital engineering and execution framework made it ideally suited to accelerate ams Osram's digital transformation roadmap.

HCL Tech share price ended the day down by 2% on the BSE.

Speaking of the stock markets, a right investing process can help you win in the long term. It might offer some unexpected and undesirable results in the short term but lets you fare well when you average the outcomes.

According to Richa Agarwal, Senior Research Analyst at Equitymaster, any investment process should not be judged based on individual outcomes. Instead, it should have stood the test of the time.

Her smallcap service Hidden Treasure has had its fair share of failures. But sticking to a disciplined process meant that Hidden Treasure's internal rate of return (IRR) increased to 24.38% since inception. This compares favourably to the IRRs of 9.6% for the Sensex, and 8.8% for the smallcap index in the same period (February 2008 - June 2020) as can be seen in the chart below.

The service's performance did suffer in the short term after the 2018 crash in smallcaps. However, the long term track record and the post Covid rebound underscores the strength of stock picking process.

If you are interested in becoming a Hidden Treasure subscriber, here's where you can sign up.

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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