5 Reasons Why Sensex and Nifty Plunged 2% Today

Wed, 27 Jan Closing

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Indian share markets witnessed heavy selling pressure today despite the US administration saying it would bring a stimulus package even without the opposition's support.

Both benchmarks, Sensex and Nifty gave up their entire gains of 2021.

At the closing bell, the BSE Sensex stood lower by 938 points. Meanwhile, the NSE Nifty ended down by 271 points.

Axis Bank and Titan were among the top losers today.

SGX Nifty was trading at 14,030, down by 223 points, at the time of writing.

The BSE Midcap index ended down by 1.4%. The BSE Smallcap index ended lower by 0.5%.

On the sectoral front, metal stocks, banking stocks and finance 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 down 0.3% and the Shanghai Composite stood higher by 0.1%. The Nikkei ended up by 0.3%.

US stock futures are trading mixed today. Nasdaq Futures are trading up by 60 points (up 0.4%), while Dow Futures are trading down by 85 points (down 0.3%).

The rupee is trading at 72.92 against the US$.

Gold prices are trading down by 0.6% at Rs 48,844 per 10 grams.

Here are Top 5 Factors Why Indian Stock Markets Plunged Today

Pre-Budget Nervousness: Pre-Budget nervousness and broader profit-taking have been attributed for the current round of selloff. Reports also state that locking up of large sums in the recent IPOs have also led to this selloff.

FIIs Turn Bearish: Foreign institutional investors (FIIs) have turned bearish on Indian share markets and have started to book profits. On January 25, FIIs net sold shares worth Rs 7.7 billion in the Indian equity market while on January 22 they sold shares worth Rs 6.4 billion.

However, so far in the month of January they have been net buyers of Rs 193.4 billion, data from NSDL showed.

US Federal Reserve Meeting: The US central bank will announce the verdict of its two-day policy meeting today, and it is expected to stand pat on policy.

Weak Global Cues: Asian and European stock markets are mixed today as investors were cautious ahead of US Fed meet outcome later today while uncertainty around US stimulus also weighed on sentiment.

Sectoral Indices Bleed: Banking and finance stocks witnessed huge selling pressure today with the Nifty Bank index plunging more than 1,000 points in intraday trade.

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 stock markets, note that the BSE Sensex crossed the historical milestone of 50,000 last week on Thursday.

The BSE Sensex rose from 40,000-mark hit on October 8, 2020 to 50,000 in just 74 sessions. Developments on the vaccine front, a change of guard in the United States, FII buying and recovery in economic growth are the key factors behind this rally.

However, in the past four trading sessions, the Sensex has lost over 2,500 points.

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. The Sensex valuation is at nearly 40 times.

Have a look at the two charts below, in the order they have been placed.

Near Term Volatility in Sensex Compensated by Long Term Gains

The year-on-year change in the Sensex was hardly predictable but someone who stayed invested multiplied every lakh nearly 14 times.

As per Co-head of Research at Equitymaster, Tanushree Banerjee, 2021 could be one of the best years for individual investors.

Here's what she wrote in one of the editions of Profit Hunter:

• 2021 could be one of the best years for individual investors.
  
  You read that right. Investing is one of those rare pursuits where amateurs can have an advantage over professional fund managers.
  
  It happens in almost no other field. If you compete against a professional sports person, you'd lose every time. As an amateur doctor or scientist, you need years of training before performing highly specialised tasks.
  
  However, individual investors who have a strategy to create long term wealth, stand a good chance at outperformance.
  
  Most professional fund managers can't afford to have long time horizons. A year or two of poor performance and they risk the sack.
  
  But an individual investor can sit tight over high conviction stocks and invest consistently to see the magic of compounding.
  
  Just like the investors in Titan saw their wealth creation unfold since 2004.
  
  So, 2021 could be extremely profitable, over time, provided you reset your portfolio with the right kind of safe assets and safe stocks.
  
  For the next decade, your best fund manager could be none other than you!
  
  Prepare well and ensure you make the most of it.

In her latest video, Tanushree discusses the best safe assets for 2021. You can watch the video here: Safest Assets in 2021 are Not What You Think...

Also speaking of stock markets, in our new video series called Momentum Moves, Brijesh Bhatia talks about what market participants can expect this week.

Tune in to the video to find out more:

Moving on to stock specific news...

Tata Consultancy Services (TCS) was among the top buzzing stocks today.

India's largest IT services provider TCS' brand value grew by US$ 1.4 billion in 2020, the highest among IT services firms globally, according to Brand Finance 2021 report.

The company's brand value stood at US$ 14,924 million in 2021 as opposed to US$ 13,499 million in 2020.

According to the Brand Finance report, the growth on brand value of US$ 1.4 billion is the highest absolute growth among the 25 firms assessed in the IT services space.

The report said this growth was seen in a challenging year when the brand value of IT services companies collectively dropped by 3%. Further, at 10% growth over the prior year, TCS has outperformed its peers in the Top 3 category.

The world's leading brand valuation firm also ranked TCS at the third position among the top 25 IT companies globally.

According to the report, this was possible because of the company's ability to quickly adapt to new ways of working through the launch of its Secure Borderless Workspaces, its remote working platform and its robust financial, customer and market performance amid the pandemic.

Apart from TCS, the other key brands that featured in the Brand Finance report under Global 500 include Accenture, which ranked 60.

Infosys was ranked at 212 in brand value at US$ 8,402 million, up 18.6% from US$ 7,087 million last year. Cognizant's brand value dipped from the rank of 219 in 2020 to 231. Other Indian IT firm HCL Technologies was ranked 353, up from 425 in 2020 and Wipro's rank rose to 457 in 2021 from 493 last year.

TCS share price ended the day down by 0.8%.

Moving on to news from the IPO space...

Kitchen appliances maker Stove Kraft which opened its initial public offering (IPO) for subscription on Monday was subscribed 2 times on the second day of bidding.

The offer size has been reduced after the company raised Rs 1.8 billion from anchor investors on last Friday, a day before the issue opening.

The subscription at retail investors desk was full as their reserved portion subscribed 10.6 times.

This is the fourth company to launch an IPO in the current month after Indian Railway Finance Corporation (IRFC), Indigo Paints and Home First Finance Company.

The IPO comprises fresh issue of Rs 950 million by the company and offer for sale of 8.25 million equity shares by promoters and investors.

The company has fixed a price band of Rs 384-385 per share.

Stove Kraft aims to raise Rs 4.1 billion through this offer. The company already raised Rs 1.9 billion from anchor investors on January 22.

We will keep you updated on the latest 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.

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

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