News reports of a fast-spreading virus strain in the UK stopped the bulls in their tracks on Monday. In the last hour of the trading session, the Sensex fell by 1,406 points or 3 per cent to close at 45,553. The Nifty index declined by 432 points to close at 13,328. It was the worst crash in the indices in seven months.
Stock indices in Europe declined between 1.5 per cent and 3 per cent after UK Prime Minister Boris Johnson said that the virus was 70 per cent “more transmissible” and other UK authorities described it as “out of control”. India suspended to and fro flights from the UK except for business and under emergency situations.
Opinion is divided on the street with regard to where the markets are headed in the near term. While there are analysts who were waiting for a sharp correction in the stock markets after a near 80 per cent rally in Sensex and Nifty since April, experts are of the opinion that the bull has more legs.
“The stupendous rally in markets has surprised everybody and hence people were hoping for a correction. Hence, Monday’s fall actually led to euphoria. The relative strength index, a key momentum indicator, had reached around 80 levels, indicating upside pressure. But that indicator fell to around 50 levels. A further market crash can be ruled out as there is not much froth in the markets on the long side now,” said Rohit Srivastava, chief strategist, Indiacharts.
Online stock broking firm Findoc Financial Services suggested to its clients that the Nifty index had support at 13,000 or 12,700 levels. The 20-day moving average was 13,320 which the index did not break even after Monday’s sharp fall.
“Fundamentally, the Nifty index is trading around the record price to multiple levels of around 36. But its average levels are around 22. In that sense, there is some more room for a downside. Hence, the overall market volatility is expected to be high in the new year too,” said Nitin Shahi, Director Findoc Financial Services Group.
Bank Nifty down 4.1%
Reliance Industries, ICICI Bank, HDFC Bank and HDFC were the biggest drags on the Sensex that led the index to fall over 500 points. The Bank Nifty index fell by 1,258 points or 4.1 per cent at 29,456.
In less than two months post the US elections, the foreign portfolio investors have pumped in more than $13 billion into stocks in India, which is a record of sorts in more than a decade.
Compared to the negative sentiments in the Europe and Indian markets, the key stock indices in the US opened just around 1 per cent lower.