The Nifty 50 opened at 22,432.20 against the previous close of 22,335.70 and fell 1.9 per cent to hit its intraday low of 21,905.65. The index closed with a loss of 338 points, or 1.51 per cent, at 21,997.70.As many as 43 stocks ended in the red in the Nifty 50 index, with shares of Power Grid (down 7.07 per cent), Coal India (down 7 per cent) and Adani Enterprises (down 6.81 per cent) as the top losers.The Sensex opened at 73,993.40 against the previous close of 73,667.96 and fell 1.6 per cent to hit its intraday low of 72,515.71. The 30-share pack closed with a loss of 906 points, or 1.23 per cent, at 72,761.89.
Mid and smallcap indices suffered massive losses. While the BSE Midcap index cracked nearly 5 per cent, the BSE Smallcap index plunged over 5 per cent in intraday trade.
Finally, the BSE Midcap index ended with a loss of 4.20 per cent and the BSE Smallcap index ended 5.11 per cent down.The overall market capitalisation of the firms listed on the BSE dropped to nearly ₹372.1 lakh crore from nearly ₹385.6 lakh crore in the previous session, making investors lose about ₹13.5 lakh crore in a single session.Over 250 stocks, including Hindustan Unilever, SBI Cards and Payment Services, Page Industries, UPL and Zee Entertainment, hit their fresh 52-week lows in intraday trade on the BSE.Barring the Nifty FMCG index (up 0.05 per cent), which ended almost flat, all sectoral indices closed with losses.Nifty Metal (down 5.69 per cent), Media (down 5.62 per cent), Realty (down 5.32 per cent), Oil & Gas (down 4.87 per cent) and PSU Bank (down 4.28 per cent) suffered massive losses.
Nifty Bank closed 0.64 per cent lower while the Private Bank index declined 0.70 per cent.
Here are the five major factors that experts believe may have triggered an across-the-board selloff in the domestic stock market today. Take a look:
1. Concerns over rich valuations
The domestic stock market is experiencing a significant selloff following a robust rally since November, which has propelled valuations upward even in the absence of fresh market catalysts.
Experts say the market appears to be in a bubble zone, especially in the smallcap segment.
"The excessive valuations in these segments driven by the irrational exuberance of retail investors have been a concern for many months now," said V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services.
2. Frothy market amid lack of fresh triggers
While the market benchmarks hit fresh record highs last week, experts flagged concerns that most positives were already discounted and the market would need fresh positive triggers to sustain the gains and move ahead. In case of no or negative triggers, the market was expected to witness consolidation which is happening now.
3. Rate cut conundrum
The US inflation rose more than expected in February, sparking worries that the interest rate cuts by the US Federal Reserve may be delayed. This boosted the dollar index, and even the US stock market surged. However, the domestic market seems to view this negatively because prolonged high-interest rates could deter foreign capital inflows into emerging markets like India, affecting them adversely.
“Delayed Rate Cuts might lead to Indian Markets being impacted negatively. This is because we may see many FIIs taking out money from the Indian markets and investing in their own country as they are receiving investment returns at higher percentages which would further widen the interest rate gap between Indian and the US," Hemant Sood, Managing Director of Findoc told Mint.
4. The impact of domestic macro numbers
India's retail inflation for February did not show remarkable improvement and came near the previous month's level while the factory output prints for January came weaker-than-expected.
As Mint reported earlier, India's consumer price index (CPI) - based inflation eased to a four-month low of 5.09 per cent in February 2024, against 5.1 per cent in January while India's industrial output growth stood at 3.8 per cent in January, unchanged month-on-month.
5. The March effect
Some experts are of the view that the stock market sees some weakness in March due to some profit booking because of the closing of the financial year.
"Some profit booking is getting done because of the financial year closing approaching," said Ajit Banerjee, Chief Investment Officer at Shriram Life Insurance Company.
Many corporates and institutional investors tend to liquidate their positions in equities in March to show profits on their balance sheets at the end of the financial year. Moreover, March is the deadline for the payment of advance tax so some corporates and investors may choose to sell equities to raise cash.
Mid and smallcap indices suffered massive losses. While the BSE Midcap index cracked nearly 5 per cent, the BSE Smallcap index plunged over 5 per cent in intraday trade.
Finally, the BSE Midcap index ended with a loss of 4.20 per cent and the BSE Smallcap index ended 5.11 per cent down.The overall market capitalisation of the firms listed on the BSE dropped to nearly ₹372.1 lakh crore from nearly ₹385.6 lakh crore in the previous session, making investors lose about ₹13.5 lakh crore in a single session.Over 250 stocks, including Hindustan Unilever, SBI Cards and Payment Services, Page Industries, UPL and Zee Entertainment, hit their fresh 52-week lows in intraday trade on the BSE.Barring the Nifty FMCG index (up 0.05 per cent), which ended almost flat, all sectoral indices closed with losses.Nifty Metal (down 5.69 per cent), Media (down 5.62 per cent), Realty (down 5.32 per cent), Oil & Gas (down 4.87 per cent) and PSU Bank (down 4.28 per cent) suffered massive losses.
Nifty Bank closed 0.64 per cent lower while the Private Bank index declined 0.70 per cent.
Here are the five major factors that experts believe may have triggered an across-the-board selloff in the domestic stock market today. Take a look:
1. Concerns over rich valuations
The domestic stock market is experiencing a significant selloff following a robust rally since November, which has propelled valuations upward even in the absence of fresh market catalysts.
Experts say the market appears to be in a bubble zone, especially in the smallcap segment.
"The excessive valuations in these segments driven by the irrational exuberance of retail investors have been a concern for many months now," said V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services.
2. Frothy market amid lack of fresh triggers
While the market benchmarks hit fresh record highs last week, experts flagged concerns that most positives were already discounted and the market would need fresh positive triggers to sustain the gains and move ahead. In case of no or negative triggers, the market was expected to witness consolidation which is happening now.
3. Rate cut conundrum
The US inflation rose more than expected in February, sparking worries that the interest rate cuts by the US Federal Reserve may be delayed. This boosted the dollar index, and even the US stock market surged. However, the domestic market seems to view this negatively because prolonged high-interest rates could deter foreign capital inflows into emerging markets like India, affecting them adversely.
“Delayed Rate Cuts might lead to Indian Markets being impacted negatively. This is because we may see many FIIs taking out money from the Indian markets and investing in their own country as they are receiving investment returns at higher percentages which would further widen the interest rate gap between Indian and the US," Hemant Sood, Managing Director of Findoc told Mint.
4. The impact of domestic macro numbers
India's retail inflation for February did not show remarkable improvement and came near the previous month's level while the factory output prints for January came weaker-than-expected.
As Mint reported earlier, India's consumer price index (CPI) - based inflation eased to a four-month low of 5.09 per cent in February 2024, against 5.1 per cent in January while India's industrial output growth stood at 3.8 per cent in January, unchanged month-on-month.
5. The March effect
Some experts are of the view that the stock market sees some weakness in March due to some profit booking because of the closing of the financial year.
"Some profit booking is getting done because of the financial year closing approaching," said Ajit Banerjee, Chief Investment Officer at Shriram Life Insurance Company.
Many corporates and institutional investors tend to liquidate their positions in equities in March to show profits on their balance sheets at the end of the financial year. Moreover, March is the deadline for the payment of advance tax so some corporates and investors may choose to sell equities to raise cash.
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Sensex falls 485 pts, Nifty below 22,150; PowerGrid, NTPC, Tata Steel top losers
In the case of Sensex, oil-to-telecom major Reliance Industries and construction and engineering major Larsen & Toubro contributed 100 points each to the index's 500-point fall. Power stocks NTPC and Power Grid contributed another 150 points to the Sensex fall. Tata Steel, Titan Company and Tata Motors also fell, dragging the index lower. Nifty fell below 20,100 in trade.
Technical chart for Nifty was already hinting at a breakdown ahead.
"Prices are currently adhering to a 'Rising Wedge' pattern, which typically suggests a forthcoming bearish breakdown. While this breakdown has yet to occur, the negative divergence in momentum indicators and the earlier breakdown in the midcap index through a 'Rising Channel' imply potential pre-emptive signs of a downturn in the benchmark index," Sameet Chavan, Head Research, Technical and Derivative at Angel One said ahead of today's session.
It's prudent to maintain a cautious approach, as any minor rebounds likely to be met with selling pressure, Chavan warned.
To be sure, there were 240 stocks on NSE under long-term additional surveillance measures; some 33 other shares were under the exchange's ASM framework on Wednesday. By noon, a total of 869 stocks on BSE had hit their lower circuit limits; 183 stocks had kissed their 52-week lows. The selloff was so broad-based that 3,333 actively traded stocks, out of 3,831 that traded today, were down and only 420 stocks were up.
Investors must focus on the sustained weakness in the broader market, particularly the smallcap segment, said V K Vijayakumar, Chief Investment Strategist, Geojit Financial Services.
"The excessive valuations in these segments driven by the irrational exuberance of retail investors has been a concern for many months now. But it has taken the strong message from the regulator SEBI to trigger a correction in the Nifty Smallcap index by 10 per cent from the February 8th peak. Actions from mutual funds also indicate the excessive valuations in the broader market," Vijayakumar said.
To recall, ICICI Pru has joined two other leading funds in stopping lumpsum investments in their mid and smallcap schemes.
"More funds may follow the suit. The net impact of this shift would be more money flowing into largecaps; the largecap outperformance is likely to continue," he said.