Profit Booking Triggers As Market Flirts With New-highs; Suffers Ruthless Sell-off

The Indian stock market sank after a red wave of massive sell-off arrived in the afternoon session on Wednesday. Profit booking was triggered after the benchmark index Nifty 50 reached the technical target of 21,500.

The National Stock Exchange (NSE) Nifty 50 index posted its worst intraday fall in nine months and concluded with 302 points fall or 1.41 per cent lower at 21,150, whereas the S&P Bombay Stock Exchange (BSE) Sensex slumped 1.3 per cent at 70,506 levels.

In the Nifty50 index, only four stocks were able to defend their gains including ONGC, Tata Consumer, Britannia and HDFC Bank. 

Conversely, 46 stocks declined in the index with Adani Ports and Adani Enterprises losing more than 5 per cent and UPL, Tata Steel and Coal India joined the 4 per cent losing club. NTPC, HDFC Life, HCL Technology, Tata Motors, Eicher Motors and M&M lost more than per cent.

Experts Call
“Markets were on a record-setting spree for a while and have been in an overbought zone, so hiccups were expected in the form of profit-taking which came to the fore today. Redemption was seen across the sectors, and even mid & small-cap stocks came under the grip of a strong bear hammering. Crude oil could emerge as a major short-term challenge in view of recent attacks on ships in the Red Sea, which may fuel volatility in this commodity price,” said Prashanth Tapse, Senior VP (Research), Mehta Equities.

“Euphoria turned into a gut punch for the market today, as the Nifty tumbled 500 points from its peak to finish over 300 points lower. While the reason for the sudden reversal remains unclear, several factors could be at play. The easy money sentiment buoyed by a buoyant primary market may have set the stage for a correction. Additionally, tight liquidity among HNIs due to their involvement in IPOs could have contributed to the selling pressure. The recent rise in COVID cases may also be serving as a convenient excuse for some investors to exit,” said Parth Nyati, Founder Tradingo.

Technically, the Nifty is attempting to fill the gap formed around 21,000 following the Fed meeting. This zone between 21,000 and 20,950 is likely to act as strong support, with the 20-DMA at 20,700 offering further downside protection. For long-term investors, this dip presents a potential buying opportunity, while traders should remain cautious and wait for a clear direction to emerge, added Nyati.

Sectoral Movement
In terms of sectoral performance, the Metal suffered the most with 3.82 per cent fall followed by IT drag of 1.71 per cent. Other indices also followed the same territory and suffered the losses.

Moreover, the more domestically focussed indices, mid-cap and small-cap also failed to hide from sell-off pressure. Mid-cap and small-cap witnessed the worst intraday fall of the month and plunged 3.27 per cent and 3.63 per cent respectively. 

Among Nifty 50 mid-cap stocks also, Zee Entertainment slumped 7.27 per cent and REC traded 7.06 per cent lower. SAIL, Power Finance and Idea traded more than 6 per cent lower.

On the other side, AU Small Finance Bank and Voltas guarded their gains of 3.93 per cent and 3.45 per cent respectively. Honeywell Automation also remained positive in the index.

Stocks Specific
Varun Beverages traded 7 per cent higher as the firm intends to acquire South Africa-based Beverage company, Bevco along with its subsidiary.

Nippon Life also soared and concluded 2 per cent higher despite a block deal worth Rs 762 crore where IndusInd sold its entire 2.86 per cent stake.

In the IPO segment, DOMS Industries IPO debuted with a massive 77 per cent premium at Rs 1400 against its issue price of Rs 790 on the bourses and settled at Rs 1326 after the closing bell.

The IPO of India Shelter Finance Corporation initiated its equity market with stocks inaugurating the bourses with a 25 per cent premium versus the issue price of Rs 620 and closed at Rs 544.