The record run of equities screeched to a halt on Wednesday as investors booked profit in banking, finance and IT counters amid a mixed trend overseas. The Nifty declined 196.75 points (1.51%) to close at 12,858.4 while the Sensex tumbled 694.92 points (1.56%) to close at 43,828.1. Kotak bank was the top loser in the Sensex pack, skidding 3.22%, followed by Axis Bank, Sun Pharma, HDFC Bank, Bajaj Finance, Asian Paints, Bharti Airtel, Infosys and Tech Mahindra.
The Sensex fell by over a 1,000 points from the day’s highs during the second half of the session and the Nifty wiped out 300 points from its highs. Wednesday’s fall was the sharpest in one month. Nifty Bank, which was responsible for this month’s rally, declined 1.8% during the day’s trade. The markets in France, Germany and the UK were down between 0.07% and 0.6%. The Asian markets too had a tepid session, with the bourses in Taiwan, South Korea, and China declining between 0.49% and 1.19%. However, the Dow Jones Industrial Average breached the 30,000-mark for the first time in the overnight session on COVID vaccine optimism.
While the markets did end in the red, foreign brokerages maintain that the risk reward in equities still remains favourable as the economic situation of the country improves. Jefferies said, “We lower our FY21 GDP degrowth forecast to negative 7.1% (negative 8.4% earlier) and raise FY22 GDP growth to 13% to factor in encouraging trends. Foreign exchange reserves are at record levels and risk to rupee is on the upside. Equity risk reward still remains favourable.”
Market experts are of the view that valuations of the markets have become high and are expected to fizzle out soon. G Chokkalingam, chief investment officer, Equinomics Research and Advisory, said: “The continuity in the profit taking will last for some more time since the current market cap is of Rs 171 trillion, which is hard to justify for the markets. The high foreign inflows have helped with perception that is causing the markets to rise. However, the valuations have become high and they are expected to fizzle out.”
Foreign portfolio investors till November 25 pumped $8 billion into the Indian equities, which is a record high monthly inflow. However, due to profit taking, FPI buying on Wednesday was lower compared with previous trading sessions. They bought stocks worth $3.2 million, according to provisional data. Domestic institutional investors sold stocks worth $245.37 million.
The futures and options segment on the NSE saw a turnover of Rs 38.91 lakh crore and the cash segment witnessed a turnover of Rs 67,494.98 crore. These are against the six-month average of Rs 19.2 lakh crore and Rs 52,327.79 crore, respectively.