Mumbai: It was a carnage, a day that Dalal Street will remember for sometime. Indian equity markets crashed across several indices. The 30-scrip sensitive benchmark - BSE Sensex ended 1,066 points or 2.61 percent in the red, closing at 39,728.41 on Thursday.
The 50 scrip Nifty50 was down by 2.43 percent - down by 290.70 points to end 11,680.35.
On the Bombay Stock Exchange the mood was largely bearish with 1,823 stocks that advanced as opposed to 816 that gained. All indices including MidCap, LargeCap and SmallCap on the BSE turned in the red. Energy stocks crashed by 3.10 percent while BSE Telecom saw a loss of 3.54 percent. Only Consumer Durables and Metals stocks saw a sub one-percent decline.
On the Sensex, except for stocks of Asian Paints which recorded a gain of 0.32 percent in the day, all stocks recorded a steep decline. Bajaj Finance posted an intra-day loss of -4.68 percent. Heavyweight stocks such as RIL (down by 3.58 percent), Infosys (-2.47 percent), TCS (- 2.53%), or HDFC (-1.60%) offered no support to control the loss for Sensex.
The loss on Infosys was a bit shocking considering the company announced favorable results a day ago. Brokerage houses such as Motilal Oswal and Emkay Global shared favourable reports on the Q2 results. That the company announced a dividend of Rs 12 also did not help stem the loss.
The Sensex seemed to trade well in the first hour of the trading session. A feeble decline was spotted on the barometer only after mid-noon. The skies came crashing through minutes after 14:00 hrs when the barometer sunk below the crucial 40,000 mark.
Deepak Jasani Head of Retail Research at HDFC Securities attributes the reason to negative cues. "Weakness in the European markets led to a fresh bout of selling in our markets post 1300 Hrs. European stocks slumped Thursday, with investors concerned about the impact of a second wave of coronavirus on the economy without any imminent stimulus to cushion the blow."
He adds, "Stalled vaccine trials and Brexit clouds also played a part in the sentiments weakening. In India we additionally had reports of a MFI defaulting on debt servicing due to internal fraud and a financial service firm facing forensic audit directed by the regulator."
"The Nifty after so many attempts has failed to go above the January high of 12431. A large bear candle at the top could result in more weakness if Nifty does not stop falling in the next 1-2 days. On falls the Nifty could take support in the 11522-11605 band," he forecasts.
Shrikant Chouhan, VP for Equity Research at Kotak Securities avers that the loss occured afer ten days of consecutive gains. The event is likely to have been stoked by negative news flows that "triggered a sharp sell-off".
It could also be a case of expiry of index contracts that accentuated the loss. Chouhan adds, "On the day of weekly expiry of index contracts, Nifty and other indices witnessed sharp sell-off."
He further elaborates, "While Nifty ended 2.52 percent lower, Bank Nifty erased the entire previous session gains to close at 23000 level, which is over 1,000 points fall from the day's highest level. Today, Nifty failed to follow continuation pattern and that triggered extreme weakness in the market. Nifty is heading towards 10500 on the minimum side. On the higher side, 11780/11800 would be key hurldes and traders should look for selling short on the Nifty with a final stop loss at 11850."
The sad news for markets is no-stimulus from Uncle Sam ahead of elections. The Presidential elections are slated for Nov 3 and US Treasury Secretary Steven Mnuchin hinted that congressional leaders were "far apart" on fresh aid for a struggling US economy. In European countries, fresh cases of Coronavirus and failure to control the raging pandemic is adding to further unrest. Both Paris and London have resumed restrictions for travel. Brexit, a probable Coronavirus cure, and US jobless data are expected to remain key factors for financial markets ahead.