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4 Reasons Why Sensex Plunged 585 Points Today
Thu, 18 Mar Closing | Monish Vora, TM Team

Indian share markets extended losses today and ended lower for the fifth straight session amid spiking US bond yields.

Even an ultra-dovish tone by US Federal Reserve Chairman Jerome Powell on Wednesday was not enough to calm the frayed nerves of global financial markets.

Benchmark indices also witnessed selling pressure tracking mixed cues from Asian peers as investors weighed the impact of rising Covid-19 cases.

At the closing bell, the BSE Sensex stood lower by 585 points. Meanwhile, the NSE Nifty ended down by 163 points.

The BSE Sensex breached below the 49,300 levels, while the NSE Nifty fell below 14,600-mark.

ITC was among the top gainers today.

HCL Technologies, on the other hand, was among the top losers today.

SGX Nifty was trading at 14,591, down by 180 points, at the time of writing.

The BSE Mid cap index and the BSE Small cap index ended down by 1.3% and 1.6%, respectively.

On the sectoral front, energy stocks, IT stocks and pharma stocks were among the hardest hit.

Shares of Blue Dart Express and Indian Energy Exchange hit their respective 52-week highs today.

Asian share markets ended on a positive note today. The Nikkei and the Hang Seng ended higher by 1% and 1.3%, respectively.

US stock futures are trading higher today indicating a positive opening for the US stock markets with the Dow Futures trading up by 37 points.

The rupee is trading at 72.54 against the US$.

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Here are Top 4 Factors Why Indian Stock Markets Plunged Today:

Surging Bond Yields: The US 10-year Treasury bond yield surged to as high as 1.72% earlier today despite the dovish tone of the US Federal Reserve.

Market participants are of the view that a spike in US 10-year bond yields to 2% will unleash chaos in global financial markets that are anyways quoting rich valuations.

The heat in the US bond market was also felt in the Indian market as the 10-year government bond yields surged past the crucial psychological level of 6.2%.

Rising Covid-19 Cases: Rising Covid-19 cases also dampened investor sentiments. Amid rising cases, Mumbai mayor urged to work together to prevent the lockdown and warned about the necessity of imposing night curfew in the current situation to check the virus spread.

The surging COVID-19 cases in India has sparked fears of a second wave of the pandemic hitting India in the coming weeks that may hamper the recovery of the economy from its first-ever technical recession in several decades.

Vaccine Concerns: Reports that a significant amount of COVID-19 vaccinations in India may be wasted due to lower off-take and a slower-than-expected rollout by the government also sparked concerns that the country may not be able to achieve herd immunity as soon as expected earlier.

Nomura said that it expects 30% of India's population to be inoculated by 2021-end, but at current pace of vaccination the phase-1 rollout may not be finished till next year.

Profit Booking: Apart from the above, losses were also seen as share market succumbed to profit-booking.

We will keep you updated on how these factors develop in the coming days and what effect they have on Indian stock markets. Stay tuned!

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In news from the commodity space, gold prices for the latest contract on MCX are trading up by 0.1% at Rs 44,901 per 10 grams.

Among gold ETFs, Canara Gold ETF and IDBI Gold ETF were among the top gainers today.

Note that gold prices have fallen as much as 20% from the recent highs. Prices have fallen from a high of Rs 56,191 in August 2020 to a low of Rs 44,150 in the first week of March 2021.

That said, let us look at how lucrative has gold been as a long-term investment in India.

The chart below shows the annual returns on gold over the last 15 years...

As you can see, barring just two years - 2013 and 2015, gold has delivered positive returns in 13 of the last 15 years.

Even with the recent volatility in prices, gold remains one of the best performing commodities this year to combat the fallout from the coronavirus pandemic.

Many gold bulls are doubting the long term potential of gold as an investment.

In one of his videos for Fast Profits Daily, India's #1 trader Vijay Bhambwani talks about why you need to seriously consider buying gold now for the long term.

In the video, Vijay talks about the long term potential of gold and explains why it's a good time to consider buying the yellow metal.

In news from the IPO space...

The initial public offering (IPO) of Nazara Technologies, which is backed by marquee investors Rakesh Jhunjhunwala and IIFL, was subscribed 8.6 times by noon hours today - the second day of bidding. The issue will be open till March 19.

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The issue received bids for 2.5 crore equity shares against an offer size of 29.2 lakh equity shares.

Non-institutional investors have put in bids 6.6 times more than their reserved portion, while the portion set aside for retail investors has seen a massive 35.4 times subscription and that of employees is subscribed 3.3 times.

The company is planning to raise around Rs 5.8 billion through this issue, of which it has already garnered Rs 2.6 billion via anchor book.

Goldman Sachs India, Government of Singapore, Aberdeen Standard Asia Focus, Fidelity Funds, Abu Dhabi Investment Authority, Nomura, Hornbill Orchid India Fund and Steadview Capital Mauritius, invested in the mobile gaming company through anchor book route.

The IPO is an offer for sale (OFS) of 5.3 million shares being sold in the price band of Rs 1,100-1,101 per equity share, representing a 16.7% stake in the company.

To know more, you can read our IPO analysis of the company here: Nazara Technologies IPO: Should You Apply? (requires subscription)

In other news, IPO of Kalyan Jewellers India was subscribed 2.3 times at the time of closing stock market hours on its final day of bidding today.

The public offer has received bids for 21.6 crore equity shares against the IPO size of 9.5 crore equity shares.

The IPO size was reduced after the company raised Rs 3.5 billion from anchor investors at the higher end of the price band of Rs 86-87 per share on March 15, a day before the issue opening.

The company is planning to raise Rs 11.8 billion through the IPO which consists of a fresh issue of Rs 8 billion and an offer for sale of Rs 3.8 billion by promoter and investors.

The Warburg Pincus' backed company is selling shares in the price band of Rs 86-87 per share. The issue will close for subscription today.

Kalyan Jewellers will use the proceeds from the share sale for funding its working capital requirements and for general corporate purposes.

In his latest video, co-head of Research at Equitymaster Rahul Shah discusses whether investing in Kalyan Jewellers IPO makes sense from a long term perspective.

You can watch the same here: Kalyan Jewellers IPO: An Honest View

How the above IPO sails through remains to be seen. Meanwhile, we will keep you updated on all the news from this space.

Moving on to stock specific news...

Bajaj Auto was among the top buzzing stocks today.

Shares of Bajaj Auto witnessed buying interest today after the auto major said that it has amended the dividend distribution policy of the company.

Prior to the amendment, the policy referred to "dividend pay-out of around 50% of profits after tax on standalone financials, to the extent possible".

Following the changes, the board will endeavor to arrive at a dividend pay-out as a percentage of profits after tax on the company's standalone financials, taking into account the surplus funds available with the company.

The dividend distribution will be up to 50% in case of surplus funds of up to Rs 75 billion, up to 70% if it is between Rs 75 bn to Rs 150 bn and up to 90% if it is above Rs 150 bn.

Surplus funds for this purpose comprises investments in financial assets other than in equity shares of group companies and strategic investments, the company said.

Stay tuned for all the updates from this space.

And to know what's moving the Indian stock markets today, check out the most recent share market updates here.

For information on how to pick stocks that have the potential to deliver big returns, download our special report now!

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