5 Reasons Why Sensex Plunged 1,024 Points Today

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Indian share markets witnessed heavy selling pressure today and ended deep in the red.

Benchmark indices registered steep falls, extending losses of the previous session on increasing fears around hawkish outlook from global central banks and a rise in crude oil prices.

At the closing bell, the BSE Sensex stood lower by 1,024 points (down 1.8%).

Meanwhile, the NSE Nifty plunged 303 points (down 1.7%).

Power Grid and NTPC were among the top gainers today.

HDFC Bank and L&T were among the top losers today.

SGX Nifty was trading at 17,230, down by 289 points, at the time of writing.

The BSE Midcap index and the BSE Smallcap index ended down by 1.3% and 0.8%, respectively.

On the sectoral front, capital goods stocks, finance stocks and banking stocks were among the hardest hit.

Shares of Bank of Baroda and Himadri Specialty Chemicals hit their 52-week highs today.

Asian share markets ended on a mixed note today. The Shanghai Composite ended 2% higher while the Hang Seng ended flat. The Nikkei fell 0.7%.

US stock futures are trading mixed with the Dow futures trading down by 86 points while Nasdaq futures are up 166 points.

The rupee is trading at 74.68 against the US$.

Gold prices are trading up by 0.3% at Rs 48,080 per 10 grams.

Meanwhile, silver prices are trading higher by 1.1% at Rs 61,498 per kg.

Here are five reasons why markets plunged today.

FIIs continue selloff: FIIs have continued their selling spree and they have even cut exposure to their favourite stocks HDFC, HDFC Banks, ICICI Bank, Kotak Mahindra Bank and Infosys.

Rising US bond yields: US bond yields spiked to 1.91%. The spike triggered concerns of high inflation, and the Fed being behind the curve.

Strong jobs data in the US increased fears of sharper than expected Fed rate hikes.

Budget cheer wearing off: The budget 2022 was a major mood-lifter for the markets in the previous week as its large capex push to revive the economy cheered investors. However, the high spirits on the budget were short-lived as global concerns have begun weighing on equities.

Rising crude oil prices: With no respite in sight for easing in rising crude oil prices, the psychological barrier of US$100 a barrel does not appear to be too far. Expectations that global supply would remain tight as fuel demand increases has kept oil prices at the higher levels with the Brent oil futures trading above the US$93-mark today.

Volatility ahead of RBI MPC: Market participants are now worried that members at monetary policy committee (MPC) might take a note of rising crude oil prices that topped US$95 a barrel mark recently and change their stance to 'neutral' from 'accommodative' while also raising reverse repo rate in the policy review.

The MPC outcome will be announced on Thursday.

We will keep you updated on the latest developments from this space. Stay tuned.

In news from the fertilizer spaceGujarat Narmada (GNFC) hit a 52-week high of Rs 535 today, rallying 15% in an otherwise weak market after the company reported best ever quarterly performance in the December quarter.

The stock of fertilizer and chemical company surpassed its previous 52-week high of Rs 518.20 touched on 6 October 2021.

For the quarter under review, GNFC's consolidated net profit more-than-doubled to Rs 5.4 bn from Rs 2.4 bn in the corresponding quarter of previous fiscal.

Consolidated revenue from operations grew 58% year-on-year (YoY) at Rs 23.8 bn.

Earnings before interest tax and depreciation and amortization (EBITDA) margins expanded 400 bps at 28%.

The company said there has been improved overall production and sales volume performance except for the product mix optimisation due to which the margins are actually enhanced.

In case of fertilizers, the support of government for granting special subsidy to compensate the fertilizer producers mainly of DAP/NP/NPKs came as breather and acted as shield towards minimising the adverse impact on financials, the company added.

When asked on outlook, it said the company is in a position to leverage boom in specific products and optimize, both, realization and profits, with flexible and multiple product basket. The company is confident of stable performance balancing its product mix to serve markets.

GNFC share price ended the day up by 13%.

Speaking of the current stock market scenario, amid the ongoing volatility, 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.

Timing the markets could be suicidal as valuations and volatility put the markets in a see-saw mode.

As an individual investor, you need to sit tight over high conviction stocks and invest consistently to see the magic of compounding.

Because 2022 could be extremely profitable, over time, provided you reset your portfolio with the right kind of safe assets and safe stocks.

In news from the automobile sector, passenger vehicle retail sales declined 10% YoY in January 2022, as the companies continued to suffer production loss amid semiconductor shortage, automobile dealers' body FADA said.

The passenger vehicle (PV) sales dropped to 2,58,329 units last month, down 10.1% from 2,87,424 units in January 2021.

Note that this drop comes despite of good demand. PVs continue to face the brunt of semiconductor shortage, resulting in the absence of a healthy inventory.

Two-wheeler sales last month declined by 13.4% to 10,17,785 units, compared to 11,75,832 units in January 2021.

Commercial vehicle sales, however, witnessed a growth of 20.5% last month at 67,763 units, as against 56,227 units in the year-ago month.

Three-wheeler retail sales also grew by 29.8% to 40,449 units in January 2022 as compared to 31,162 units a year ago.

FADA president Vinkesh Gulati stated that with the Union Budget stressing on developing 25,000 kms of new highways, it will further push infrastructure spending, thus, increasing commercial vehicle sales.

The upcoming marriage season will also trigger some demand revival for the two-wheeler segment, Gulati noted.

We will keep you posted on latest developments from this space. Stay tuned.

Moving on, shares of HDFC group companies witnessed heavy selling pressure today. All the four listed firms - HDFC, HDFC Bank, HDFC AMC and HDFC Life Insurance were down in the range of 3 to 4%.

HDFC Life hit a 52-week low of Rs 600.15, slipping below its previous 52-week low of Rs 615.80 hit on 31 January 2022. The stock has now corrected around 23% from its 52-week high of Rs 775.65 touched on 2 September 2021.

For the most recent quarter, the insurance firm posted 3.3% YoY rise in net profit at Rs 2.7 bn amid a decline in income from investment. The company's gross premium income remained healthy with a 27% increase to Rs 122.6 bn, led by traction in renewal premium and new business premium.

Meanwhile, shares of mortgage lender HDFC hit an over six-month low of Rs 2,421, down 3%.

Recently, HDFC reported an 11% jump in net profit to Rs 32.6 bn in the October-December period of fiscal 2022. Net profit was aided by higher income and lower-than-expected credit loss.

Disclosure: Equitymaster Agora Research Private Limited (Research Analyst) bearing Registration No. INH000000537 (hereinafter referred as 'Equitymaster') is an independent equity research ...

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