Sensex plummets 1,650 pts, Nifty crashes 2%; what should investors do?

The Indian benchmark indices extended losing streak for the second straight session on Wednesday, falling over 2% intraday amid broad-based sell-off across banking space, led by heavyweight HDFC Bank. The weakness in global markets, with Asian and European stocks falling amid negative closing at Wall Street overnight amid renewed concerns about rate cuts, further dented sentiment. The fall in the market was also attributed to profit booking as investors took breather after sustained rally in five consecutive sessions.  

Continuing its downward trend for the second consecutive session, the BSE benchmark Sensex fell as much as 1,647 points, or 2.25%, to hit an intraday low of 71,481 today. On Tuesday, the 30-share index closed 0.27% lower. 

In a similar trend, the NSE Nifty declined as much as 473 points, or 2.14%, during the session so far to touch an intraday low of 21,559 mark.

The broader market also reeling under selling pressure, with BSE midcap and smallcap indices falling up to 1% during the session.

The top laggard on the BSE Sensex pack were HDFC Bank, which fell over 8% after the country’s largest private sector lender released its second quarter results. Among others, Tata Steel, Kotak Mahindra Bank, Axis Bank, and ICICI Bank were notable losers, falling in the range of 2-4%.

Bucking the trend, IT stock showed some resilience, with index heavyweights Tata Consultancy Services, Infosys, HCL Technologies, Tech Mahindra rising up to 1.5%.

On the sectoral front, all the indices were trading in red, except IT and Teck, with bankex and metal space emerging as the worst performers. The bankex index dropped over 4%, led by HDFC Bank, Kotak Mahindra Bank, Axis Bank, Au Small Finance Bank, and Federal Bank.

On the global front, Asian markets were trading mostly lower, while European stocks witnessed gap down opening, following sell-off on Wall Street in overnight trade after a hawkish comment by Federal Reserve Governor Christopher Waller. The Fed Governor indicated interest rate cuts could come more slowly than anticipated, which triggered a spike in yields on the U.S. 10-year bonds and the dollar index. The benchmark U.S. Treasury yield climbed over 4%, regaining its highest level since mid-December.

What should investors post market crash today?

Naveen Kulkarni, Chief Investment Officer, Axis Securities PMS, says, “Today’s market fall is led by banks on the back of HDFC Bank results, showing heightened levels of credit/deposit (CD) ratio beyond RBI’s comfort levels. This is the case with most other banks as well. Thus, the markets expect either margin pressure, in case banks go in for aggressive deposit mobilization, a slowdown in lending growth, or both.”

Kulkarni cautions that the development can lead to some de-rating of the sector. “After the significant up move we have witnessed recently, markets are taking a breather, especially since market valuations are higher than historical multiples.

He expects heightened levels of volatility in the markets in the near term. “In the near term, we expect heightened levels of volatility in the markets while we remain constructive on the Indian markets from the medium to long-term perspective due to strong economic growth,” he adds.

Santosh Meena, Head of Research, Swastika Investmart, says that PSU banks are outperforming in a weak market as they have valuation comfort as well as a tailwind in bullish momentum in the PSU space. “Most of the PSU banks are likely to post a strong set of earnings. I believe their outperformance is likely to continue where Bank of India is my top pick in small PSU banks, while SBI from large-cap names should also catch up the momentum.”

“If we talk about the overall market, then 21,650–21,500 is a key demand zone for the Nifty. Until buy-on-dip texture is continued, while below 21,500, we can expect short-term weakness towards the 21,000–20,800 zone,” Meena says.

Shrey Jain, Founder and CEO SAS Online, says that tt's wise to adopt a wait-and-see approach before making any decisions. “Regarding Nifty, right now, 22,120 is like a barrier that's difficult to surpass. This might be a good chance to buy stocks, but it's crucial to set a stop loss for safety.”

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