Investors lose Rs 20 lakh crore in stocks in five trading sessions; what’s next?

Investors lost nearly Rs 20 lakh crore in wealth in a five-day fall on Dalal Street that sent the benchmark BSE Sensex falling over 3,817 points to sub-57,500 levels on Monday. The 30-share index plunged 6.23 per cent to 57,491.51 on January 24 from 61,308.91 on January 17. Likewise, the 50-share NSE Nifty index also tanked 6.33 per cent to 17,149.10 during the same period.

Amid the sell-off, the combined market value of BSE-listed firms declined by Rs 19.52 lakh crore to Rs 260.50 lakh crore from Rs 280.02 lakh crore on January 17. Market watchers believe that weak global cues, heavy selling by foreign institutional investors (FIIs) and risk-off sentiment across the globe amid fear of tightening by the US Fed dampened the mood in the domestic equity market.
 
Amar Ambani, senior president and institutional equities head, YES Securities, sees further weakness in the equity market. “Indian equities corrected massively, possibly reacting to US equities trending lower and rise in crude oil prices. There were no positive triggers to take the market upwards in the near term. While a further 500 points downside cannot be ruled out in the Nifty. Corporate earnings have been positive so far and Omicron didn’t disrupt the economy materially. The structural story remains intact and I am confident that Nifty will achieve a higher high in 2022, than what we saw in 2021."

Barring Hero MotoCorp (up 0.39 per cent) and Power Grid Corporation of India (up 3.46 per cent), other components in the Nifty index wiped off investors’ wealth during the same period. With a fall of 14.76 per cent, Bajaj Finserv emerged as the top loser in the index. It was followed by Tech Mahindra (down 12.60 per cent), Divi’s Laboratories (down 12.40 per cent), Bajaj Finance (down 12.07 per cent) and Shree Cement (down 11.57 per cent). Wipro, JSW Steel, HCL Technologies, Infosys, Tata Steel and Adani Ports also declined over 10 per cent.

Mohit Nigam, head-PMS, Hem Securities said, “We believe this is an overreaction to US Fed tightening and we may witness a rally again in the short term post FOMC meeting. We have a bullish view on the Indian economy and believe that investors should utilise this correction as an opportunity to accumulate quality stocks in tranches. On the technical front, 17,000 and 17,500 are immediate support and resistance in Nifty 50 respectively. For Bank Nifty 36,500 and 37,500 are immediate support and resistance respectively.”

Foreign Institutional Investors (FIIs) stood net sellers in the equity segment last week, with gross purchases of Rs 33,196.95 crore and gross sales of Rs 43,844.86 crore, leading to a net outflow of Rs 10,647.91 crore.

Parth Nyati, Founder, Tradingo said, “If we look at the last three years’ trend then we see a pre-Budget sell-off on the back of global weakness then we see a post-budget rally however the long-term trend in the first quarter of any calendar year means January to March remains weak. The market is overreacting to US Fed tightening and we may see some short-covering after the Fed meeting outcome scheduled on this Wednesday.”

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