After the 7-week sprint which led to the frontline indexes touching new highs, investors and traders finally decided to book profits on Wednesday, as a result of tensions related to pandemic. Nifty and Sensex saw a decline of ~1.4% and ~1.3% respectively. These falls were their worst declines since 26th October. Decline in the indexes came as Singapore revived mandates related to masks and gave travel advisory due to the spread of JN.1, a new sub-variant of COVID-19. Moving a little away from the Indian stock market news, as of now, India has seen 21 cases of this new sub-variant, with Centre asking different states and Union territories to oversee the scenario vigilantly.
Other indexes saw a bigger fall, as Nifty Midcap 150 and Nifty Smallcap 250 tanked more than 3% each. Wednesday showed that the markets can’t move in the linear fashion. If past is any indication, market tend to fall post the rally of 7 weeks. However, reasons for decline or triggers might vary from valuations to geopolitical events or, like right now, Covid-19. Fear gauge India Vix saw an increase of 4.2% to 14.45, highest level in around 2 months.
There are analysts and traders who expect that resurgence of COVID cases was an excuse investors were looking to book profits. Equity markets were a bit stretched.
Coming to the Indian stock market news, experts believe that some categories of stock which were trading at steep valuations post ~40%–50% increase in mid-cap and small-cap indexes since the month of March might see worst correction. This is because India’s nominal GDP growth rate plus risk premium and India premium make up only ~18%–19%.
Foreign portfolio investors (FPIs) sold provisional INR1,322 crore worth of shares, with DIIs purchasing (net) shares worth of INR4,754.34 crore, exhibiting that retail investors would have sold a lot more to account for the decline witnessed in the market. Stocks facing the worst selling were Adani twins i.e., Adani Ports and Adani Enterprises, with both these scrips falling ~6% each. Commodity stocks too saw the brunt of sell-off with stocks such as Coal India, UPL and Tata Steel tanking 4%–5%.
Coming to the small-caps, negative momentum was seen in commercial services and supplies company Rattan India Enterprises, Indian Overseas Bank, Indiabulls Housing Finance, which declined by more than ~10% each. High-beta counters are bound to see the brunt of the volatility which Indian markets saw Wednesday.
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