Sensex slumps nearly 2 per cent, Nifty ends below 17,900 ahead of F&O expiry

Our Bureau Mumbai | Updated on October 28, 2021

Broader market under pressure, Volatility index nears 18

Bears kept a grip on the market on Thursday, with benchmark indices closing nearly 2 per cent lower on weak global cues, continuous FPI selling and a slew of IPOs taking away liquidity. The downgrading of Indian equities to equal weight by global major Morgan Stanley further aggravated the selling pressure.

The market opened negatively, tracking weak global cues and extended losses through the day, witnessing across-the-board selling with nearly 2,300 stocks closing in the deep red.

Apart from the weak global cues, rich valuations and the impact of commodity inflation on corporate profit margins have been weighing on investor sentiments.

The volatility index jumped over 6 per cent to close above per cent the 17-mark at 17.91. The market remained volatile as F&O contracts on the NSE expired today.

The BSE Sensex closed at 59,984.70, down 1158.63 points or 1.89 per cent. It hit an intraday high of 61,081.00 and a low of 59,777.58. The Nifty 50 closed at 17,857.25, down 353.70 points or 1.94 per cent. It recorded an intraday high of 18,190.70 and a low of 17,799.45.

"While the fundamental leading indicators are positive, we see valuations as increasingly constraining returns over the next 3-6 months, particularly as we head towards Fed tapering, absorbing the impact of higher energy costs and our expectations of a first RBI hike for the cycle in February 2022," Morgan Stanley said in a report.

Sea of red 

The majority of the stocks traded on the exchanges closed in the red. Some of the actively tracked stocks such as HIL, Adani Enterprises, Tata Chemical, Punjab National Bank and Vaibhav Global crashed over 10 per cent.

As many as 2,295 stocks declined on the BSE compared to 985 stocks advanced while 125 remained unchanged. Furthermore, 259 stocks hit the upper circuit compared to the 255 stocks locked in the lower circuit. Besides, 166 stocks touched a 52-week high level, and 40 touched a 52-week low.

Vinod Nair, Head of Research at Geojit Financial Services, said, "Bears continued to dominate domestic indices tracking cues from weak Asian and European markets ahead of a policy update from the European Central Bank."

"Globally investors are on the edge awaiting the US GDP data releasing later in the day along with the outcome of the Fed meeting scheduled for next week. Domestic markets witnessed broad-based selling dragged by banking, metal and realty stocks," added Nair.

IndusInd Bank, L&T, Ultratech Cement, Asian Paints and Shree Cement were the top gainers on the Nifty 50 while Adani Ports, ITC, ONGC, Kotak Bank and ICICI Bank were the top losers.

According to Santosh Meena, Head of Research, Swastika Investmart Ltd, relentless selling by FIIs is another key reason for this correction in the market.

“Today, Morgan Stanley downgrades India to equal weight due to outperformance by Indian markets in recent months. Inflation and slowdown in global growth momentum are other concerns amid expensive valuations. The rise in fresh covid cases in some of the countries is also disturbing the mood of the investors. We are in a structural bull market where intermediate corrections will be a part of this journey and these kinds of corrections will provide good buying opportunities in quality stocks,” said Meena.

MSCI India has generated 26 per cent in the last six months. It has outpaced the MSCI EM index by 30 per cent over the same period, partly due to bullish consensus earnings expectations (+34 per cent YoY EPS growth for 2021 and +18 per cent for 2022) a favourable reform agenda.

However, notwithstanding the already-sharply upgraded consensus earnings through 2021, India's 12-month forward P/E ratio has moved to an all-time high of 24.1x.

"As a result, India is the most expensive market in our model on EM-relative 5-year trailing z-score of P/B and P/E. We believe this might see the index take a breather from here and look for some consolidation, with our India strategy team preferring Consumer Discretionary and Financials while avoiding Technology and Healthcare," Morgan Stanley said.

All sectors down

On the sectoral front, all indices closed in the red. Nifty PSU Bank recorded the highest losses, closing over 5 per cent lower. Nifty Realty was down 3.77 per cent. Nifty Metal and Nifty Bank also closed over 3 per cent lower. Nifty Financial Services and Nifty Private Bank were down nearly 3 per cent.

Nifty Pharma, Nifty Healthcare Index and Nifty Oil & Gas were down 2 per cent. Nifty FMCG Nifty Consumer Durables, and Nifty IT also lost nearly 2 per cent.

S Ranganathan, Head of Research at LKP Securities said, "Expiry Day witnessed all-round profit booking ranging from retail facing lenders to FMCG and across Metal names. Amidst all the ongoing excitement around the Primary Market Offerings , the Bulls had nothing going right for them as sectoral indices ended in the red.”

Broader indices

Broader indices also closed in the red and midcaps, and smallcaps also faced selling pressure.

Nifty Midcap 50 was down 1.68 per cent while Nifty Smallcap 50 was down 2.09 per cent. The S&P BSE Midcap was down 1.38 per cent, while the S&P BSE Smallcap was down 1.56 per cent.

Published on October 28, 2021

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