Mayhem at Dalal Street: Sensex crashes over 1,400 points, Nifty below 17,200

FPJ Web DeskUpdated: Monday, January 24, 2022, 02:13 PM IST
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The rising interest in US markets and fears of US Fed to taper down bond purchase program is one of the prime reasons for stocks crashing. |

The stock market indices crashed at noon trade. The benchmark Sensex was down 1,460.88 points at 57,576.30. The Nifty was down 443.15 points at 17,174.00.

The rising interest in US markets and fears of US Fed tapering down bond purchase program is one of the prime reasons for stocks crashing. However, some experts see this as a meaningful correction in the market as the intensity of selling is very high on the back of heavy FIIs' selling.

Shares of online food aggregator Zomato extended its losses from last week and declined 18 per cent in early trade on Monday apparently due to low valuations. Over the past one-month period, Zomato's shares fell nearly 30 per cent.

Paytm parent One97 Communications' shares fell to a record low on Friday. The stock settled at Rs 959.9 apiece for the day, down 3.5 percent from its previous close.

Shares of telecom service provider Vodafone Idea declined over six per cent on Monday after the company reported about its widening net losses during Q3FY22.

New age stocks fall

Shrikant Chouhan, Head of Equity Research (Retail), Kotak Securities Ltd, said, "New age and all the expensive stocks are falling mainly due to specific newsflow regarding rising interest rate in the US markets and rollback of stimulus. Whenever we see a sudden jump in the 10-year bond yields we see sell-off inexpensive stocks in terms of valuation."

Not just US markets but other markets with sustained high inflation are likely to follow the trend, said Rajnath Yadav, Research Analyst, Choice Broking. This will hamper the said, "With inflation at almost 30 years high, US Fed is likely to aggressively taper down its bond purchase program and faster than expected normalize the policy rate. Other markets with sustained higher inflations are also likely to follow the trend, thereby hampering the nascent recovery in the global economy. This is the reason why there is aggressive sell-off in the Nasdaq index (since the start of year) in the US market. We feel that this current negative sentiment will continue and thus will be negative for domestic loss making tech-based companies with poor track record. Until the dust settles, we are recommending investors to keep away from this space.

Heavy FII selling

Parth Nyati, Founder, Tradingo said, "We are seeing a meaningful correction in the market and the intensity of selling is very high on the back of heavy FIIs' selling. There is risk-off sentiment across the globe amid fear of tightening by the US fed. We are underperforming today and the main reason is global weakness while another reason is some margin calls got triggered especially in new edge companies and that is causing a ripple effect. Anecdotally, Monday remains ugly in a weak market because lots of unwinding is seen by those who carry over the weekend in hope of recovery. "

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, Nyati said.

Technically, 17,150 will be a critical support level which is a 61.8 percent retracement of the previous rally from 17,410 to 18,350; below this, we can expect Nifty to move towards its 200-DMA that may coincide with 16800 level. If Nifty manages to recover from the 16,150 level then we can expect a pullback rally where 17,600-17,800 will be an immediate resistance area, Nyati said.

Trend is bullish

The overall trend is bullish where we are seeing a period of correction and this may surprise us with a deeper cut but that will be a good buying opportunity. "I have a bullish view on Banking, Capital goods, Real estate Infrastructure, and selective auto names", added Nyati.

"Zomato is witnessing a vertical fall and slipped below the low made on a listing day which is not a good sign for any counter. There is a risk-off situation across the globe amid fear of tightening by the US Fed where if we look at the trend then there is a sharp sell-off in growth stocks (new edge businesses) especially loss-making companies," said Santosh Meena, Head of Research at Swastika Investmart to PTI.

Many new edge companies came out with unrealistic valuations amid euphoria in the market but we know that only a few companies will survive in the long run and I believe Zomato has the potential to perform in the long run, Meena said.

The ongoing correction is leading to stock at a reasonable valuation where aggressive investors can use it as a buying opportunity with a long-term view, he added.

Zomato is witnessing a vertical fall and slipped below the low made on a listing day which is not a good sign for any counter, added Nyati.

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