Carnage On D-street: Sensex Slumps 1416 Pts, Nifty Below 15,850

The bears seem to be in no mood to let bulls take control of the market as Thursday’s trading session saw carnage on Dalal Street. Several factors were at play during the day, but global inflationary pressures weighed the most on investor sentiment. On Wednesday, the biggest fall in nearly two years on Wall Street sent Asian stocks into the red zone on Thursday.

The 30-share Sensex plummeted 1416.30 points or 2.61 per cent to settle at 52,792.23. Its broader peer Nifty50 slipped 430.90 points or 2.65 per cent to settle at 15,809.

"The rout in other Asian indices and European gauges triggered a massive sell-off in local equities as both Sensex & Nifty ended below their crucial psychological levels of 53,000 and 16, 000, respectively. Investors fretted over stagflation risks and the Federal Reserve's more hawkish stance to rein in inflation by opting for more rate hikes, which would have a bigger impact on the economy going ahead. Till the time FIIs remain net sellers, the south-bound journey will be difficult to reverse," said Shrikant Chouhan, Head of Equity Research (Retail), Kotak Securities.

Massive rate hikes weighed heavy on investor sentiment. Federal Reserve Chair Jerome Powell on Tuesday had already pledged that the Fed would ratchet interest rates as high as needed to kill a surge in inflation. On Wednesday, the minutes of RBI's off-cycle MPC meeting showed that significant rate hikes are imminent in future MPC meetings. 

Economists at Nomura Holdings, Barclays and Deutsche Bank AG forecast the RBI to raise rates by as much as 50 basis points when it meets June 6-8. Citigroup said the minutes reveal a “clear hawkish commitment” by the central bank to bring back inflation closer to its 2-6 per cent target band.

Investors lost nearly Rs 6.36 lakh crore in Thursday's session. Data showed the BSE market capitalisation fell 6.3 lakh crore to Rs 249.40 compared to Rs 255.7 lakh crore on Wednesday.

"The global cues are quite negative. The continuous FII selling is putting pressure on the markets. Domestic Institutions and retail have been buying but are quite saturated now since their recent purchases are coming down every day. This is making retail investors very nervous," said Arun Malhotra, Founding Partner & Portfolio Manager, CapGrow Capital Advisors.

"The long-term investors should focus on the large caps since a lot of value has emerged because the prices have been coming down, while the results and outlook have been strong. Volatility is the best friend for long-term investors. This downward spiral in prices of good quality scrips is giving a wonderful opportunity to own quality businesses at reasonable valuations," added Malhotra.

On the Sensex, ITC and Dr Reddys Laboratories and Power Grid Corporation settled in green. Percentage wise, ITC was the star of the day as it surged 3.43 per cent. On Wednesday, it released its results for the quarter ended March and registered nearly a 12 per cent jump in net profit. Apart from the results, investors were also enthusiastic about ITC due to rising hopes that it would fare far better than its peers in this inflationary environment on back of its high-margin in its cigarette segment. ITC saw expanding margins in nearly each of its segments in the quarterly results.

Dr Reddy's Laboratories though registered a slump in its consolidated profit after tax for the quarter ended March. It was down own by 76 per cent to Rs 87.5 crore against Rs 362.4 crore in the same quarter a year ago. Still the stock surged 0.82 per cent.

Percentage wise, Wipro was the top loser on the Sensex as it slipped 6.21 per cent. Other top losers include HCL Technologies (6.01 per cent), Infosys (5.46 per cent), TCS (5.17 per cent), Tech Mahindra (5.07 per cent) and Tata Steel (4.86 per cent).

Life Insurance Corporation of India (LIC) continued its downward spiral as it slipped 4.05 per cent and closed at Rs 840.85 apiece on NSE. 

J.P. Morgan analysts said on Thursday surging inflation, supply-chain issues and the hit from the Ukraine war will bring an end to the growth boom that India's IT services industry enjoyed during the pandemic. 

IT stocks were the top five percentage losers on the Nifty, with Infosys, Wipro, HCL Technologies, Tech Mahindra and Tata Consultancy Services plunging between 5-6 per cent.

"Post gap down opening, Nifty has formed a bearish candle which indicates further weakness from the current levels. Currently, the index is trading near 15700-15750 support level, hence a quick pullback rally is not ruled out if the index succeeds to trade above 15700. For traders, as long as the index is trading below 15900, the correction wave is likely to continue and below the same it could retest the level of 15700. On the further down side, the index could slip to 15600. On the flip side, above 15900, the Nifty could move up to 16000-16100 levels," said Chouhan.