Rs 8 lakh crore selloff! Sensex plunges 1,400 points from day’s peak as bulls lose steam; 3 triggers

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ETMarkets.com

After opening, Sensex and Nifty bulls pushed the market sharply higher, with the benchmark indices rising nearly 1% each to hit 74,682 and 23,121 respectively. However, the bears took over in the afternoon, with Sensex plunging around 1,400 points from its day’s high to 73,258 and Nifty erasing over 450 points to trade below the 22,700 level.

Eternal shares plunged 5% to lead losses on Sensex as investors awaited the Zomato and Blinkit-parent’s Q2 results. Bajaj Finance shares dropped 4%, while shares of Maruti Suzuki, Trent, NTPC, BEL, IndiGo, Axis Bank, Bajaj Finserv, M&M, Tata Steel, Adani Ports and Kotak Mahindra Bank fell up to 3%. Bucking the trend, shares of IT stocks including Infosys, Tech Mahindra, TCS and HCL Technologies jumped up to 3% while UltraTech Cement shares also gained 2%.

Broader markets plunged deeper into the red, with Nifty Midcap 100 and Nifty Smallcap 100 indices crashing up to 3%. Among the sectors, Nifty Auto, Nifty Metal and Nifty Consumer Durables indices dropped more than 2% each. The overall market breadth was sharply negative, with NSE seeing 3,033 declines against 496 advances, while 103 stocks retained unchanged.

The sharp plunge wiped off more than Rs 8 lakh crore from the total market capitalisation of all companies listed on BSE, dragging it down below Rs 460 lakh crore.

Here are the key factors pushing market down today:

1) Oil prices rise

Oil prices crossed $110 per barrel mark again on Wednesday as Middle East supply concerns loomed, with traders worrying about shipping risks and threats to oil infrastructure in Saudi Arabia. Brent crude futures jumped more than $1 to trade at around $110 per barrel. WTI Crude futures also gained more than a dollar to trade at around $99 per barrel

A supertanker caught fire after striking a sea mine in the south of Strait of Hormuz while "violating" Iranian regulations, Iran's Revolutionary Guards Navy said on Tuesday, as quoted by the Iranian media. There were at least 18 vessel attacks reported over two weeks, shiptracker Kpler said in a note on Monday.

2) Bond yields rise

Bond yields rose after brief easing. The benchmark 10-year Treasury yield rose to 5.12%. The 30-year Treasury yield also climbed above 5.4%. Rising bond yields typically make debt markets more attractive to investors, which in turn puts pressure on the riskier equity markets. Bond yields move inversely to bond prices, so the soaring yields reflect a sharp selloff in bonds.

3) Persistent FII selloff

After remaining net buyers of Indian equities on Friday, FIIs resumed selling Indian equities on Monday, selling shares worth Rs 1,149 crore, according to provisional data on NSE. Overall, FIIs have heavily offloaded Indian equities, putting strong pressure on the market. FIIs have remained net sellers of Indian equities in 10 out of 12 sessions in October so far, heavily weighing on Indian markets.

What lies ahead for Dalal Street?

Oil prices crossed $110 per barrel while bond yields continue to rise. “With Brent crude prices and US bond yields remaining elevated, the market is likely to remain under pressure. The sell on rally market construct will continue in the near-term. However, the improving earnings growth, fair valuations of large-caps, and strong domestic liquidity will support the market on declines,” said Vijayakumar from Geojit Investments.

“Since the Q2 results season has started on a positive note and some positive surprises are likely in the broader market, the market action, going forward, will be more stock-specific and results-sensitive. Despite the external headwinds, this is a stock picker’s market now,” he added.

Technical view on Nifty

The mean reversion pull back having unfolded on anticipated lines, Anand James, Chief Market Strategist at Geojit Investments, remains hopeful towards resumption of Nifty’s upmove.

Alternatively, the index’s slippage past 22,840 and 22,780 would significantly dilute the upside prospects, but the analyst will wait for a fall past 22,700 to completely abandon such hopes, he said.