Investors lose over Rs 5 lakh cr in a day; Sensex falls the most since Aug 2015

Traders would have taken a sigh of relief and said ‘Thank God it’s Friday’ amid relentless selling on D-Street. The S&P BSE Sensex plunged nearly 1,400 points, second-worst fall since August 2015 while the Nifty50 witnessed a massive 400-point drop on Friday.

For the week, the S&P BSE Sensex witnessed a fall of about 7 percent while the Nifty50 was down by 7.3 percent. Investors lost more than Rs 11 lakh cr in terms of market capitalisation during the week.

Let’s look at the final tally on D-Street on Feb 28 – the S&P BSE Sensex plunged 1448 points or 3.6 percent to close at 38,297 while the Nifty50 was down 431 points to close at 11,201.

Sectorally, selling pressure was seen in metals, IT, Infrastructure, public sector, energy, auto, banks, and oil & gas stocks.

Broader markets underperformed as the S&P BSE Midcap index was down 3.1 percent while the S&P BSE Smallcap index closed with losses of 3.5 percent.

Top Nifty losers include names like Tata Steel, Tech Mahindra, Tata Motors, and Vedanta. IOC bucked the trend as the stock closed 0.09 percent higher.

On a day when bulls run for cover, as many as nearly 500 stocks on the BSE hit a fresh 52-week low that include names like Bosch, Gillette India, Hero MotoCorp, ACC, Thermax, Lupin, Rane Holdings etc. among others.

What should investors do?

It was the sixth consecutive day of decline on D-Street which took the benchmark indices below crucial support levels on Friday. In the last six days, Sensex has come off 3,026 points, Nifty has lost 924 points.

The rising fear of Coronavirus across different countries is showing its impact on equity markets as well amid slowdown fears across the globe.

A global recession is likely if coronavirus becomes a pandemic, and the odds of that are uncomfortably high and rising with infections surging in Italy and Korea, Moody’s Analytics said on Wednesday.

Foreign institutional investors have turned negative on Indian markets, pulling out more than Rs 11000 cr as of February 27 so far in the month of February.

“Alongside an expansion in global impact from nCoV, foreign flow has turned significantly negative this week. Foreign institutions have sold a net $ 1.5 bn worth stock in the first four sessions this week – besides another $ 1.2 bn in single stock futures and $ 500 mn in index futures,” S Hariharan – Head – Sales Trading, Emkay Global Financial Services told Moneycontrol.

“In sum, their positioning has turned significantly bearish – their net short position in index futures is now the most bearish in data going back to 2014 (barring a single session in Aug 2019), while their net long position in single stock futures is the smallest since Jun 2019. Globally too, risk-off sentiment is reflected in a strong rally in US treasuries and 10% drop in crude oil prices,” he said.

Crude oil prices have come off significantly and are trading near $ 50/bbl, to hit their 14-month low which is good for Indian markets but it also signifies global growth outlook which looks slightly bleak.

It is still difficult to predict the extent and impact of Coronavirus but the equity markets are in critical condition and they are looking for some positive triggers on the front of Coronavirus for any kind of respite.

Technically, 11200-11100 is a sacrosanct support area for the Nifty and there is a good chance that Nifty may stabilize here and bounce back towards 11700 level, suggest experts.

Going by past precedencies, the recovery in markets (post containment of such epidemics) is equal or higher than the fall.

As the fall has been too-fast-too-soon, markets have gone into oversold zone (i.e. RSI of Nifty-50 has gone to 25 level) – hence the risk-to-reward is favourable; hence, it make sense to accumulate stocks.

“Since the risk-reward ratio has turned favorable for the market, it is ideal to accumulate stocks keeping in mind the downside of 11,000 for Nifty-50,” Rusmik Oza, Sr. VP (Head of Fundamental Research-PCG) at Kotak Securities Ltd.

Stocks in the news:

Metal stocks hammered: Metals stocks continued to take a beating on February 28 with the index tumbling over 6 percent as inventory levels grew in China due to fast-spreading coronavirus though production has started in some parts of the world’s second-largest economy. Stocks including Vedanta, Tata Steel, JSW Steel, JSPL, Hindustan Copper, NMDC and SAIL ended with loses between 5-12 percent.

Aviation stocks fall: Aviation stocks nosedived on February 28, in sync with the broader market sentiment, as concerns over rising cases of coronavirus continued eroding the risk appetite of investors. Share price of SpiceJet shed almost 4 percent while Interglobe Aviation was down 5 percent.

Lemon Tree: Lemon Tree Hotels share price shed 5 percent on February 28 despite the hospitality company opening its second international hotel in the Bhutanese capital Thimphu.

BSE-listed auto stocks plummeted nearly 9 per cent on Friday as supply chain disruptions due to coronavirus outbreak dented the outlook of the industry, which saw its worst-ever sales decline in two decades recently.

Technical View:

Nifty formed a ‘Long Black Day’ kind of candle on the daily charts

Nifty is approaching certain critical long term averages, on longer time frame charts, from where Nifty took support and staged a rally after major corrections in the past.

Hence, in the near term crucial support to watch out will be 11,111 which should not be violated atleast on weekly closing basis.

The next logical support of entire rally from the lows of 10670 – 12430 is placed around 11022 levels.

“If the downswing continues even in next week then ideally Nifty shall hold these levels to expect some sort of decent pull back rally. In case of a pull back initial target can be towards 11530,” Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory, Chartviewindia.in told Moneycontrol.

“Considering the deep cuts and uncertainty surrounding the global markets it looks prudent on the part of traders to remain neutral and wait for some consolidation before initiating long positions,” he said.

Three levels: 11111-11,175, 11400, 11530

Subscribe to Moneycontrol Pro’s Annual plan for Rs 399/- for the first year. Use coupon PRO2020 (Available on Web & Android only).