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Indian stock markets nosedived today as the country recorded more cases of the Omicron variant over the weekend. The Sensex plunged 950 points to 56,747 while Nifty plunges 284.45 pts to 16,912.25. The three-day monetary policy committee meeting of Reserve Bank of India started today. The RBI is expected to maintain status quo on the interest rate policy but investors will watch out for commentary from the central bank to get direction.

The Indian rupee today plunged 30 paise to settle at 75.42  against the US dollar in line with massive erosion in domestic stocks as concerns over the new Omicron variant continued to weigh on sentiment.

Santosh Meena, Head of Research, Swastika Investmart, said: “Nifty slipped below its 100-DMA amid broad-based selling led by technologies names. Nifty is continuing its corrections after a minor pullback where it has again slipped below its 100-DMA. The selling can be attributed to rising cases of omicron variant in India along with other countries whereas FIIs are also continuing to hold their hand on the sell button. There was a sharp selling in tech stocks in the USA in Friday's trading session and the same was replicated in our market where the Nifty IT index ended with a cut of 2.7% however there was broad-based selling because there was no sectorial index that ended on a positive note. The market may continue to remain volatile amid news flow related to the omicron variant."

Technically, 16800-16700 is a critical support zone for the nifty where we can expect a bounceback while below this zone, 16400 will be the next important support level. On the upside, 17000 will act as an immediate intraday resistance for tomorrow while 100-DMA of 17181 will be the next hurdle; above 100-DMA, we can expect a short covering move towards the 17300-17350 zone.

Banknifty still manages to close above its 200-DMA that is currently placed at 35700 level. If it starts to trade below this level then we can expect further weakness towards the 35000 level otherwise it may witness a bounceback. On the upside, 36000 will be immediate and intraday resistance while 36500/37000 will be the next resistance levels.

Vinod Nair, Head of Research at Geojit Financial Services, said: "Ambiguity surrounding Omicron continued to dent the morale of domestic investors ahead of the important RBI policy announcement on Wednesday. The domestic market is expected to be volatile as the near-term will be dominated by developments on new variant and, RBI and Fed policy decisions. Market expects RBI to hold on to the accommodative policy considering short-term uncertainties. However, a change is expected during H1 2022, which Indian market is factoring while global equities are trading mixed."

All Sensex components ended in the red. IndusInd Bank was the top loser, shedding nearly 4 per cent, followed by Bajaj Finserv, Bharti Airtel, TCS, HCL Tech and Tech Mahindra.

"Indices started the day weak and selling intensified during afternoon trade with almost all sectoral indices ending in the red. As the Street awaits the RBI stance on interest rates, the Nifty sold off below 17,000 today as Bears held upper hand on a day which saw no recovery. FII selling continued with no respite despite accumulation seen today in high quality financials by local investors," said S Ranganathan, Head of Research at LKP Securities.

European shares and US futures rose Monday after a lackluster day in Asia, where shares fell in Hong Kong and Shanghai after troubled Chinese property developer Evergrande warned it may run out of money. Moving to reassure investors and keep growth from stalling, China's central bank cut the amount of funds banks are required to keep in reserve. 

Shrikant Chouhan, Head of Equity Research (Retail), Kotak Securities, said: “There was no respite for the markets as investors continued to dump stocks at will due to uncertainty over the current threat of the omicron variant of coronavirus. Weakness in other Asian markets also further worsened the sentiment. After last Friday's sharp fall, the Nifty quickly broke the 17100 support level. The index has formed a long bearish candle and closed below the 17000 mark which is broadly negative for the market. However, on intraday charts, the market looks extremely oversold. For day traders, the texture is volatile and weak and 17000 could act as a trend decider level. Below the same, the correction wave will continue up to 16850-16800 levels. On the flip side, above 17000 intraday breakout, a pullback rally could move the index up to 17085-17125 levels. Contra traders can take a long bet near 16800 with a strict 16750 support stop loss."

However, investors are meanwhile also struggling with uncertainty about the newest coronavirus variant and about when the Federal Reserve will cut off its support for markets.

Foreign institutional investors were net sellers in the capital market on Friday as they offloaded shares worth 3,356.17 crore, as per exchange data. 

Manish Hathiramani, proprietary index trader and technical analyst, Deen Dayal Investments, said: “The markets continued its downward trajectory and has threatened the 16900 level. The index is heading towards the recent low of 16750-16780. If we break that, the Nifty can fall to 16400-16450."

 

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