5 Reasons Why Sensex Plunged 536 Points Today

Thu, 28 Jan Closing

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Extending losses to the fifth straight session, Indian share markets witnessed selling pressure throughout the day today and ended deep in the red.

At the closing bell, the BSE Sensex stood lower by 536 points. Meanwhile, the NSE Nifty ended down by 150 points.

Axis Bank and SBI were among the top gainers today. HUL, on the other hand, was among the top losers today.

SGX Nifty was trading at 13,830, down by 153 points, at the time of writing.

Both, the BSE Midcap index and the BSE Smallcap index ended lower by 0.5%.

On the sectoral front, realty stocks, IT stocks and FMCG stocks were among the hardest hit.

US stock futures are trading lower today indicating a weak opening for Wall Street indices. Nasdaq Futures are trading down by 142 points (down 1.1%), while Dow Futures are trading down by 118 points (down 0.4%).

The rupee is trading at 73.03 against the US$.

Gold prices are trading down by 0.3% at Rs 48,725 per 10 grams.

Here are Top 5 Factors Why Indian Stock Markets Plunged Today

US Fed Raises Concerns: The Federal Reserve on Wednesday raised concerns over US economic growth and left its key overnight interest rate near zero, and made no change to its monthly bond purchases, pledging again to keep those economic pillars in place until there is a full rebound from the pandemic-triggered recession.

Pre-Budget Nervousness: Traders were seen lightening their positions ahead of Union Budget on Monday amid monthly expiry of January futures and option contracts.

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 while the safe-haven dollar rallied as Wall Street's sell-off and delays in coronavirus vaccines provided an excuse to book profits on recent gains.

The Hang Seng was down 2.6% and the Shanghai Composite stood lower by 1.9%. The Nikkei ended down by 1.5%.

Under pressure from global stock markets, benchmark indices also traded in the red. The BSE Sensex gave up the 47,000-level while the Nifty slipped below 13,850.

FIIs Turn Bearish: The third day of consecutive selling by FIIs (Rs 16.9 billion) has turned the market mood bearish.

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. 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 here editorial yesterday, 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!

Speaking of stock markets, 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 commodity space, demand for gold in India in calendar year 2020 dropped to a 25-year low of 446 tonnes as compared to 690.4 tonnes in 2019, as per the latest report released by World Gold Council (WGC).

"The last time the demand hit such levels was in 1995 at 462 tonnes," said Somasundaram PR, managing director for India, World Gold Council.

Total jewellery demand, too, slipped 42% at 315.9 tonnes as compared to 544.6 tonnes in 2019. In value terms, jewellery demand in 2020 came in at Rs 1,332.6 billion, down 22% as compared to 2019.

"India's gold demand dropped by over a third in 2020 on the back of Covid-induced lockdowns and lifetime high prices. However, the drop was significantly lower when viewed in value terms, 14% lower than 2019 as prices were up 34% hovering around Rs 50,000/10grams for most past of the year," Somasundaram said.

On an overall basis, gold demand in India during December 2020 quarter stood at 186.2 tonnes, marginally down by 4% as compared to the previous corresponding period in 2019 (194.3 tonnes). In terms of value, however, the demand was 26% higher at Rs 827.9 billion YoY as prices rose over the year.

For 2020, global gold demand came in 14% lower at 3,759.6 tonnes, WGC said, and attributed the fall to the coronavirus pandemic that was the key driving factor behind weakness in consumer demand throughout 2020.

This is the first time since 2009 that the global demand for the precious yellow metal on an annual basis slipped below the 4,000 tonne mark. Global gold-backed ETFs holdings grew by 877.1 tonnes during 2020, reaching record year-end holding of 3,751.5 tonnes.

In news from the financial markets, as per a leading financial daily, the government is likely to be less tightfisted with spending in the upcoming budget as it's keen to support the economic recovery.

Overall expenditure for FY22 could be bumped up by about 12-14% over the budgeted estimate for this year, with substantial increases for healthcare, infrastructure and defence sector.

Total expenditure was budgeted at Rs 30.42 lakh crore in the current fiscal, which may only rise marginally in the revised estimates despite the large Covid-related extra spending, as many ministries were unable to utilize their allocation due to the pandemic.

The fiscal deficit, which was pegged at 3.5% of GDP, could go up to 6.5-7% of GDP in FY21. The budget for FY22 could swell to nearly Rs 35 lakh crore.

Speaking of the Budget, in his latest video for Fast Profits Daily, Brijesh Bhatia explains how you can make money out of the market volatility both pre and post budget.

Tune in to the video to find out more:

Moving on to stock specific news...

Bharti Airtel was among the top buzzing stocks today.

Bharti Airtel today said it has become the country's first telecom operator to successfully demonstrate and orchestrate live fifth-generation (5G) service over a commercial network in Hyderabad city.

Airtel did this over its existing liberalized spectrum in the 1,800 MHz band through the NSA (non-standalone) network technology. Using dynamic spectrum sharing, Airtel seamlessly operated 5G and 4G concurrently within the same spectrum block.

Airtel said this demonstration has underlined the company's technology capabilities. The full impact of the 5G experience, however, will be available to customers when adequate spectrum is available and government approvals received.

"Every one of our investments is future-proofed as this game-changing test in Hyderabad proves," said Gopal Vittal, Managing Director and CEO.

The Sunil Mittal-led telco is also exploring OpenRAN technology for the deployment of 5G along with existing 3GPP-approved NSA (Non-Stand Alone) and SA (Stand Alone) ways of deploying the technology.

Bharti Airtel share price ended the day up by 0.1%.

Moving on to news from the automobile sector, auto major Maruti Suzuki reported a 25.8% year-on-year (YoY) growth in consolidated profit at Rs 19.96 billion for the December quarter (Q3FY21).

Maruti's revenue rose 13.3% to Rs 234.7 billion. In comparison, the company had posted revenue of Rs 207.2 billion in the corresponding quarter of last year.

The company's EBITDA came in at Rs 22.3 billion, up 6% YoY, while EBITDA margin for the quarter stood at 9.5% against 10.1% reported in Q3FY20.

During the quarter, Maruti sold a total of 4.95 lakh vehicles, up 13.4% on YoY basis. Sales in the domestic market stood at 4.67 units, higher by 13% YoY. Exports were up by 20.6% at 28,528 units.

The company said that improved capacity utilization, lower sales promotion expenses, cost reduction efforts and higher value gains on invested surplus contributed positively to the margin movement. On the other hand, adverse commodity prices, unfavorable product mix, and adverse foreign exchange fluctuation had a negative impact.

Maruti Suzuki share price ended the day down by 3.6%.

To know more, you can read Maruti Suzuki's Q3FY21 result analysis on our website.

And 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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