Sensex drops 1,200 pts from day's high, Nifty goes below 17,200: Why are markets spooked

 

Indian equity markets took a sharp 'U-turn' on Monday as benchmark indices sank into deep red on Monday, despite a positive opening.. Bears were back as jittered global sentiments weighed on the feeble investor sentiments, pushing the markets further lower.

The 30-share pack BSE Sensex gyrated in a range of more than 1,400 points and finally dropped about 900 points to settle at 58,238, whereas Nifty 50 dropped more than 375 points from day's high at 17,154. Weakness prevailed in the broader market as well as BSE Mid-cap and Small-cap indices plunged up to 2 per cent each.

Fear gauge India VIX swung wildly during the trading session but finally settled at 16.21-level, after rising more than 21 per cent. Investors at Dalal Street went poorer by another Rs 4.21 lakh crore as combined market capitalization of all BSE listed companies dropped to Rs 258.73 lakh crore.

Here are the top factors that are weighing on market sentiments:

SVB Bank Crisis
The fallout of startup lender Silicon Valley Bank is weighing on the market sentiments. Traders across the globe are sensing the 'Deja-Vu' of 2008, when investment bank Lehmon Brothers went bankrupt, leading to a global recession. However, US authorities have moved to shore up deposits and stem any wider fallout from the sudden collapse of the tech startup lender.

Bloodbath was seen in the global market as the fallout of Silicon Valley Bank was followed by turmoil at Signature Bank, keeping investors worried about the strength of the US banking system, said Vinod Nair, Head of Research at Geojit Financial Services.

US Inflation data
Investors across the globe will be looking at US inflation numbers, scheduled for Tuesday, March 14 for the cues for interest rate hike path ahead of its FOMC meeting next week.

"The Fed’s decision in the upcoming meeting will have a crucial impact on the market sell-off, as the consensus is reversing to no rate hike trajectory. Also, the US inflation due on Tuesday will have a vital impact in the short-term as the market anticipates a cool down from January levels," Nair from Geojit added.

FII flows
Global institutional investors have been pulling out money from the Indian markets. On Friday, FPIs sold domestic shares worth 2,061.47 crore. However, FPIs have net invested Rs 13,586 crore through exchanges in the Indian market through March 10, but a bulk of this has gone into Adani stocks by GQG Partners.

India's inflation numbers: India will announce its retail inflation numbers for February on Monday, after the market hours, whereas WPI inflation numbers are slated for Tuesday, March 14. The market will closely watch both data points as it is expected to decide the next course of action by the Reserve Bank of India in its next policy meeting scheduled in the first week of April.

Technical outlook

The index on the weekly chart is consolidating for the past many weeks and prices are gradually shifting their base lower indicating a bearish to sideways momentum, said Rohan Patil, technical analyst, Samco Securities.

"The overall trend remains in a bearish mode where selling on the rise is advisable. The support for the Nifty is placed at around 17,250-17,200 levels and resistance is capped at 17,650-17,800 levels. In case the Nifty breaches below 17,200 levels, then 17,000 will be the next support zone. A strong break above 17,650 will indicate a strength to move higher," he said.

Shares of Mukesh Ambani-led conglomerate Reliance Industries Ltd (RIL) hit a fresh 52-week low today amid market crash. RIL stock hit a new low of Rs 2275 on Monday, before ending the session about 2 per cent lower at Rs 2,284.90.

In the Nifty50 pack, Tech Mahindra rallied about 7 per cent as the IT major appointed Mohit Joshi as its next CEO and MD. Apollo Hospitals, Britannia Industries and ONGC were the only names that managed to settle in green during the session.

Among the IndusInd Bank plunged over 7 per cent even as the lender received the approval for the re-appointment of Sumant Kathpalia as managing director and chief executive officer for another two years. SBI, Tata Motors, M&M, Adani Ports and Eicher Motors dropped 3 per cent each.

Deepak Jasani, Head of Retail Research, HDFC Securities said that the collapse of startup-focused Silicon Valley Bank continued to batter European and some Asian markets, while US large banks failed to hold onto a brief premarket rally after authorities moved to stem the contagion.

"Goldman Sachs Group economists said they no longer expect the Fed to deliver a rate increase next week. The risk of a banking crisis highlights the tension between Fed efforts to cool the economy and tame inflation with increasing concerns," he said.

A total of 3,757 shares were traded on BSE during Monday's session, of which 2,838 settled lower. Among remaining names, 766 shares advanced while 153 remained unchanged for the day. A total of nine shares hit an upper circuit during the session, whereas only eight others tested the lower circuit levels.

In the broader markets, a few cash stocks from Adani Group, namely Adani Transmission, Adani Green Energy, Adani Total Gas and Adani Power hit an upper circuit of 5 per cent each. Shipping Corporation of India was also up 5 per cent after the demerger announcement.

Yes Bank plunged 5 per cent to Rs 15.65 as the mandatory lock-in of three years for its shares ended. Mahindra CIE Automotive plunged 9 per cent to Rs 359.65 as M&M, one of its promoters, sold 4.6 per cent stake in the company via block deal. Sona BLW Precisions was also down 7 per cent to Rs 405.8 as Blackstone sold its entire 20 per cent stake.

 

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