Nifty hits multi-year low, what should investors do now?

Indian market recorded its worst day in history as both Sensex and Nifty50 registered their worst falls in absolute terms on March 12, the second time in the last 3 sessions.

The S&P BSE Sensex plunged more than 3,000 points to hit a 2-year low, while Nifty50 broke below 9,600 to hit a 32-month low.

Investors lost more than Rs 11 lakh cr in terms of market capitalisation on the BSE. The average market capitalisation of BSE-listed companies fell from Rs 137.13 lakh cr recorded on March 11 to Rs 125.87 lakh cr as on March 12.

Let’s look at the final tally on D-Street – the S&P BSE Sensex plunged 2919 points to close at 32,778 while the Nifty50 plunged 868 points to close at 9590.

India VIX also hit a 12-year high. It rose 34 percent to close at 42.32.

Sectorally, all the sectors hit their fresh 52-week low, led by PSU Bank index which hit a fresh record low. Among the sectoral losers, Auto index fell nearly to a 6-year low, and the Metal index slipped to a 3-Year low. The Nifty Bank fell 2,517 points to 23,971, to hit a 2-year low. The Nifty Midcap index hit a 39-month low

What is causing the meltdown?

The global selloff got triggered after the U.S. President Donald Trump banned travel from Europe to stem the spread of coronavirus, threatening more disruptions to trade and the world economy.

The World Health Organisation on March 11 said coronavirus ‘can be characterised as a pandemic’. The Indian government also said it will suspend all tourist visas in a sweeping attempt to prevent the spread of coronavirus as cases across India continued to rise

Most of the Asian markets closed in deep red mimicking fall in US markets overnight which effectively placed Dow Jones in a bear territory.

“With the WHO declaring COVID-19 a Pandemic and with the delay in the US stimulus plan, the DOW was punished hence our markets as expected opened gap down,” S Ranganathan, Head of Research at LKP Securities told .

“Our markets witnessed frenzied selling throughout the day as almost everything was sold into with the VIX reaching alarming levels. Central Bankers and Governments globally now need to take swift action to tackle the twin menace of a recession and Covid-19,” he said.

What should investors do?

The business continues as usual for countries across the globe. Yes, these are signs of a slowdown but that should fade away with time. Markets are discounting the fear triggered by margin calls across the globe.

“On the ground, things are not as bad as the stock market is telling. The stock market is showing lot more panic than what it is on the ground. One of the reasons for the selloff is the trigger of margin calls, and leverage is going,” Ajay Srivastava of Dimensions Consulting said in an interview with CNBC-Tv18.

“Global markets were sitting on huge leverage where investors borrowed on negative rates or zero rates and then invested in the market. One of the reasons why stocks are taking a beating because leverage is disappearing,” he said.

Siddharth Mehta, Founder & CIO, Bay Capita is of the view that the markets may well go down further, investing when terrified is one of the hardest things to do.

“It is through this terror that one must think rationally and look to buy great businesses which are unleveraged, which are stellar capital allocators with the highest governance standards and which will not just survive but come out stronger over the next 5 to 10 years and thus potentially provide outsized returns to the intrepid investor,” he said.

Top Nifty losers: YES Bank, Vedanta, SBI, UPL, and BPCL.

Stocks & Sectors:

Sectorally, the S&P BSE Public Sector index fell 10 percent, followed by the S&P BSE Infrastructure index which was down 10.33 percent, and the Oil & Gas index was down 9.8 percent.

Volume spike of 100-400% was seen in stocks like Exide Industries, Colgate Palmolive, Tata Power, Havells India, and GMR infrastructure.

Short Buildup was seen in stocks like TCS, Eicher Motors, Jubilant FoodWorks, PVR, Havells India, and Voltas.

At a time when market recorded their worst day in history more than 1000 stocks on the BSE hit their fresh 52-week low that include names like Bosch, P&G, Gillette India, Tide Water Oil, and UltraTech Cements,

Stocks in the news:

Shares of KPIT Technologies fell over 8 percent on March 12 after the company has entered into an agreement with Vayavya Labs Private Limited (VL) and its shareholders for acquiring the company.

Arvind Fashions: Arvind Fashions share price touched a 52-week low, falling over 6 percent on March 12 after the board approved the issue of equity shares to existing equity shareholders on a rights basis.

Aviation stocks tumble: Aviation stocks including InterGlobe Aviation and SpiceJet tanked 11 percent and 20 percent respectively after the government suspended all existing visas, except diplomatic, official, UN/international organisations, employment, project visas until April 15.

Yes Bank: Share price of YES Bank ended 13 percent in the red. SBI Executive Committee of Central Board (ECCB) accorded approval for purchase of 725 crore shares in Yes Bank at a price of Rs 10 per share subject to all regulatory approvals.

Bharat Forge: Bharat Forge share price was down 8 percent, the company announced a voluntary retirement scheme (VRS) for its eligible employees who have completed 10 years of service with the company.

Technical Factors:

Nifty50 registered a bearish candle

It opened the day with a huge gap down which created largest ever fall of 8% in the recent history of Nifty index

The level of 9500 on Nifty seems to be the major last technical support which one can bank on, based on long term trend studies

In case if Nifty slips below 9508 in the near term then next support is placed around 9182 levels

Three levels to track: 9182, 9508, 9800

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