Terrible Thursday! Sensex falls 1,000 points; Investors lose ₹7 lakh crore; What spooked the market?

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Sensex slipped 1,062 points to settle at 72,404 amid an across-the-board sell-off on Thursday. The frontline index Nifty 50 tanked 345 points to 21,958, slipping below the psychological level of 22,000 for the first time since April 19, reflecting weak investor sentiment on Dalal Street.

The muted cues from the fourth-quarter earnings of large-cap companies and uncertainty surrounding the outcome of the general elections have further dampened investor sentiment. The volatility index, India VIX, also jumped 6.56% to 18.20 levels, rising for the eleventh consecutive session.

Domestic stocks eroded nearly ₹7 lakh crore worth of investor wealth on Thursday. Data showed investor wealth, as suggested by the combined BSE market capitalisation fell to ₹393.73 lakh crore in today’s trade.

Index heavyweights Larsen & Toubro (L&T), ITC, HDFC Bank were the top contributors to the market crash.

Experts view

“The fall in the market is primarily attributed to the prevailing uncertainty surrounding the general elections. This uncertainty has significantly bolstered India’s volatility gauge, the India VIX, reaching its 52-week high at 19, indicative of market apprehension,” said Arvinder Singh Nanda, Senior Vice President at Master Capital Services.

In the global context, Nanda said that a subdued sentiment has developed due to the hike in crude oil prices, which has aggravated inflationary concerns. “This escalation comes amidst the US Federal Reserve’s decision to undertake any interest rate cuts, which could potentially contribute to further market decline. Additionally, Nifty prices are currently trading below their 55-day EMA which has served as key support in the past.”

With a voter turnout ratio of 65.68%, slightly lower than in 2019 for the same seats except Assam, investors have turned nervous about the BJP’s expected seat count.

“We expect this volatility to continue in the near term in the absence of any major positive trigger. Now till Nifty holds below 22000 zones, weakness could be seen towards 21700,” said Siddhartha Khemka of Motilal Oswal.

Continued selling by Foreign Portfolio Investors (FPIs) has weighed on the overall market sentiment, as they have been net sellers so far this year. FIIs offloaded Indian equities worth ₹2,854 crore on May 8.

Tech view

The Nifty 50 index has been in a larger range movement of around 22800-21750 levels in the last couple of months and is currently nearing a lower range and also a crucial support around 21750 levels for the short term. Having bounced back decently from this support in the past, there is a higher probability of a minor upside bounce from this lower support in the coming sessions, said Nagaraj Shetti, senior technical research analyst at HDFC Securities.

Shetti said that Nifty’s immediate resistance should be at 22100 levels.

According to Rupak De of LKP Securities, bears remained at the helm as the index fell sharply following a breakdown below 22200, where significant Put writing had been visible.

“On the day of mayhem, the index kept breaking the supports as buyers did not buy the dips. The trend looks extremely weak with a possibility of a further fall in the near term. On the higher end, immediate resistance is visible at 22200; the market might remain sell on rise until it stays below 22200,” he added.

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow