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Thursday, May 6, 2021

Sensex snaps 6-day winning run, tanks 839 points on China border tensions

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NEW DELHI: Chinese troops violated the line of actual control (LAC) in Eastern Ladakh but the biggest casualties were lying on Dalal Street in Mumbai. Stocks fell like ninepins on Monday due to the escalation in geopolitical tension and pressured by high valuations.

Analysts tracking the market said a correction was long overdue. Confusion over new margin rules that is scheduled to kick off from September 1 also played on the minds of investors, they added.

At one time during the trade, the 30share pack Sensex had plunged over 1,600 points from day’s high but recovered fractionally to close at 38,628.29, down 839.02 points or 2.13 per cent from last close. NSE flagship Nifty tumbled 260.10 points or 2.23 per cent to 11,387.50.

Market at a glance:

  • India VIX surges 27%, reflecting rise in fear on Street
  • Nifty Media top sectoral loser; Inox, PVR fall up to 9%
  • Nifty Pharma, Nifty PSU Bank fall 5% each
  • ONGC, TCS: Just two out of 50 Nifty stocks close in green
  • All Future Group stocks close at upper circuit limit on RIL deal
  • Investors lose Rs 4.55 lakh crore as BSE mcap slips to 153.76 lakh crore
  • 122 stocks hit 52week highs, mostly from smallcap space: Adani Green, Astrazeneca, SBI Card, Mindtree and Timken top names

Investors will now be eying a number of factors to see if they find clues whether the market will extend losses or Monday’s fall was just an aberration. This includes Q1 GDP print that is scheduled later in the day, and auto sales and PMI data from Tuesday onwards.

They will also keep a keen eye on India VIX, which registered a massive surge on Monday. Any further jump in the index means traders are spooked and volatility can be expected in coming days.

Among the blue chip stocks, Sun Pharma was the biggest loser, down 7.29 per cent at Rs 515.25. SBI, Cipla, Bajaj Finserv, Zee Entertainment, NTPC, IndusInd Bank, Eicher Motors and Bajaj Finance were among other top losers, falling over 5 per cent each.

On the other hand, gainers could be counted on fingers. Among Nifty stocks, oil explorer ONGC was the biggest gainer, up 1.62 per cent to Rs 81.65 followed by IT giant TCS that added 0.65 per cent.

“Although markets opened with gains, it quickly succumbed to a bout of selling, following profit booking after the recent runup. The losses extended, following reports of increased tensions along the border with China. With increased geopolitical tensions, markets also traded uncertainty and this could impact the market behaviour in the coming days. Investors advised to remain cautious,” said Vinod Nair, Head of Research at Geojit Financial Services.

Broader market was sea of red as Nifty Smallcap slumped 4.75 per cent, extending the loss to the second session. Nifty Midcap snapped its 10day rally and crashed 3.95 per cent. NIfty 500 was down 2.79 per cent.

City Union Bank, AU Small Finance Bank, Bombay Burmah Trading Corporation, Indiabulls Real Estate, Gujarat Alkali and Sunteck Realty were among the top losers from the space, falling up to 10 per cent

However, Future Group stocks were among the top gainers from the space, thanks to RIL’s decision to buy the Group’s businesses. Future Enterprises, Future Market Networks, Future Consumer, Future Lifestyle Fashions and Future Supply Chain Solutions advanced 5 per cent each while Future Retail surged 20 per cent.

“Technically, a decline below 11,300 in Nifty would reverse the short term uptrend. In case of a rebound, it would find difficult to cross 11500-11550 zone. We suggest using rebound to reduce longs positions and adding few shorts through options trades.”

Among sectoral indices, Nifty Media was the biggest loser dragged by multiplex stocks as the government refrained from permitting them to open cinema halls. PVR fell 8.74 per cent and Inox Leisure 6.87 per cent. NIfty PSU Bank and Nifty Pharma were other top losers. All indices closed in the red.

Market breadth was in favour of losers with 536 stocks ending in the green while 2,329 names closing with cuts. As many as 122 securities hit 52week highs, mostly from the smallcap space. Meanwhile, 50 names hit 52week lows, mostly from microcap space. About 240 stocks hit the upper circuit and 525 lower circuit limit.

Globally, barring Japan’s Nikkei that jumped over a per cent on massive investment in five japanese firms by Warren Buffett, other Asian markets closed with cuts up to 2 per cent. European markets were mixed with France’s CAC and Germany’s DAX up up to 0.5 per cent but London’s FTSE fell 0.61 per cent.

Let’s prepare for tomorrow

  • GDP print: Market will react to June quarter GDP print on Tuesday.
  • New margin rules: New margin rules in the cashs segment will be applicable from tomorrow but analysts have warned of disruptions. “The change in margin system could undoubtedly bring disruptions in volumes of daily trading as there is insufficient preparation and validation by the participants in this system,” said Deepak Jasani, Head of Retail Research, HDFC Securities
  • Auto sales data: Auto companies will start reporting August sales data from Tuesday which may cause stock specific actions.
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