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Worst fall for Sensex, Nifty since May 4: Here's what investors should expect next

Sensex closed 1,406.73 points or 3 per cent lower at 45,553. This was its biggest single-day fall since May 4 this year

Aseem Thapliyal | December 21, 2020 | Updated 18:29 IST
Worst fall for Sensex, Nifty since May 4: Here's what investors should expect after Monday correction
Investors lost Rs 6.59 lakh crore in wealth as market cap of BSE-listed firms fell to Rs 178.79 lakh crore

 Sensex snapped its six-session record-setting streak on Monday as a new strain of the coronavirus in the UK hit global markets quashing hopes of economic recovery expected next year.

Sensex closed 1,406.73 points or 3 per cent lower at 45,553. This was its biggest single-day fall since May 4 this year. Nifty tanked 432.15 points or 3.14 per cent to end at 13,328.40. Investors lost Rs 6.59 lakh crore in wealth as market cap of BSE-listed firms fell to Rs 178.79 lakh crore.

All Sensex stocks ended in the red, with ONGC leading the losers, tumbling 9.15 per cent.

Shares of IndusInd Bank, M&M, SBI, NTPC, ITC, Axis Bank and PowerGrid shed up to 6.98 per cent.

India VIX surged 24.54% to 23.19, signalling heightened volatility in equity market.

Sensex ends 1,406 points lower, Nifty slips 432 points: All you need to know about the market crash

Here's a look at how analysts see market moving ahead after today's crash.

Sanjeev Hota, Head of Research, Sharekhan by BNP Paribas said, "We expect equities market to witness further volatility in the near term. Nevertheless, correction after big rally is always a healthy sign for the market and provides good opportunity to add quality stocks for investment purpose. We continue to remain positive on equities for next 2-3 years owing to weakness in USD coupled with pro-growth government policies and dovish fiscal policies."

Jaideep Hansraj, MD & CEO, Kotak Securitiess said,"Fresh concerns over the spread of coronavirus in UK and Europe dragged the Indian market that lost over 3 per cent on Monday. The new strain of coronavirus in UK has led to correction across European markets. Parts of Asia like Hong Kong are also considering measures such as curfews and shutdowns to tame the virus. As we head towards Christmas vacation and calendar year end, FII flows are expected to moderate which could also be one of the cause of steep correction."

Deepak Jasani, Head of Retail Research at HDFC Securities said, "Nifty has formed a large bearish candle which has engulfed the high low range of the previous 9 sessions. In the process two upgaps formed in this period have been filled nullifying the bullishness.

The advance decline ratio on the NSE on Dec 21 was the worst since March 23, 2020 when the Covid fears were at the peak. This suggests across the board panic selling/profit booking. A large fall on a Monday does not augur well for the week. A breach of 13209 on the Nifty could result in another 200-250 point fall."

Subash Gangadharan, Technical and Derivative Analyst, HDFC Securities said, "Technically, with the Nifty correcting sharply and closing below the crucial supports of 13,447, the index is now in a short term downtrend. Immediate supports are now at 13,131. Any pullback rallies could find resistance at 13,447-13,500."

Ajit Mishra, VP - Research, Religare Broking said, "We've been maintaining a cautious on markets and reiterate the same for the following sessions too. The recent spurt of COVID cases in the UK has spooked the markets world over as the new variant could increase the transmission rate. Now, the next step is strict travel restrictions, which would dent the economic recovery.

Technically, Nifty has tested the lower band of the prevailing rising broadening formation around 13,150 and its breakdown could trigger a further decline towards the 12,700-12,800 zone. In case of a rebound, the 13,400-13,600 zone would act as a hurdle. We suggest avoiding naked leveraged trade in the futures segment and preferring option strategies until the markets stabilise. Investors, on the other hand, should utilise this fall and accumulate quality stocks on dips."

Shrikant Chouhan, Executive Vice President, Equity Technical Research at Kotak Securities,"It's a bearish reversal formation the short term. Nifty could slide to either 13000 levels, where it has support as per Options data or 12500, which was the highest of the previous up-move (all time highest levels on Nifty till January 2020). On the higher side, 13400/13500 would be hurdle zone.

Reduce weak long positions between 13400/13500 levels. Only strong markets can cross and close above 13500 levels. Strong buying opportunity between 12700/12600 levels for medium term investors."

Vinod Nair, Head of Research at Geojit Financial Services said, "The vulnerability of market was high due to quick gains made in the ongoing rally leading to low margin of safety. We do not expect a big correction rather a consolidation, in the short-term, of not more than 7% to 10% in the main indices. Buying at dips can be considered as a strategy in the falling market."

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