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6 Reasons Why Sensex Plunged 1,708 Points Today
Mon, 12 Apr Closing | Yash Vora, TM Team

Indian share markets witnessed huge selling pressure today as fears that the government could go for stricter lockdowns to curb the second wave of Covid-19, hampering the economic recovery, spooked market participants.

At the closing bell, the BSE Sensex stood lower by 1,708 points (down 3.4%).

Meanwhile, the NSE Nifty ended down by 524 points (down 3.5%).

Bajaj Finance and IndusInd Bank were among the top losers today.

SGX Nifty was trading at 14,350, down by 536 points, at the time of writing.

Midcap and smallcap stocks plunged today. The BSE Mid cap index and the BSE Smallcap index ended down by 5.3% and 4.8%, respectively.

On the sectoral front, realty stocks, banking stocks and automobile stocks were among the hardest hit.

Asian share markets ended on a negative note today. The Shanghai Composite and the Hang Seng ended lower by 1% and 1.1%, respectively. The Nikkei stood lower by 0.8%.

US stock futures are trading lower today with Dow Futures trading down by 81 points.

The rupee is trading at 75.06 against the US$.

Gold prices for the latest contract on MCX are trading up by 0.3% at Rs 46,751 per 10 grams.

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Here are Top 6 Factors Why Indian Stock Markets Crashed Today

Spike in Covid-19 Cases: A sharp rise in Covid-19 cases are posing a serious threat to the economic recovery of the world.

India has reported 1,68,912 fresh Covid-19 cases in the last 24 hours - the biggest spike in daily cases witnessed since the pandemic began last year.

Lockdown Fears: One of the key reasons behind today's weakness is the possibility of a lockdown in Maharashtra, which contributes 14.5% of the country's overall GDP.

Many Indian states have announced restrictions on human gatherings and the threat of a complete lockdown looms.

Rising Bond Yields: US Treasury yields climbed on Friday after higher-than-expected March producer price data showed inflation had risen, echoing other reports that said the world's largest economy was on a steady road to recovery from the pandemic.

Macro Data: Data out this week is expected to show US inflation jumped in March, while retail sales are seen surging perhaps even with a double-digit gain.

Depreciating Rupee: The domestic currency declined 39 paise against the US dollar, looking set to extend its losing streak to the sixth day in a row as investors were spooked by the fast-rising Covid-19 cases in the country.

The rupee slipped to 75.13 versus the US dollar, a level seen in August last year.

Profit Booking: Apart from the above, losses were also seen as share market succumbed to profit-booking after a healthy rise witnessed for the stock markets lately.

Most of the profit-booking was seen in the banking sector today with stocks such as IndusInd Bank, SBI, Kotak Bank and Axis Bank dragging the benchmark index lower.

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!

Learn: How to Potentially Accumulate Rs 7 Crore in Wealth Over the Long-term

Speaking of the current stock market scenario, note that smallcap stocks have been on a roll recently with the BSE Small-Cap index hitting a new high in intra-day deals last week on Thursday.

The BSE smallcap index had crashed to a multi-year low of 8.6k back in March 2020. Who would have thought that in less than a year, the index will come roaring back and go up a massive 133%?

Despite the Covid-related headwinds, Indian stock markets registered their best financial year performance in a decade in FY21. While the Sensex and Nifty surged 68% and 71% respectively, gains in mid-and small-caps have been sharper with both the indices rallying 91% and 115%, respectively.

While caution is indeed warranted, Richa Agrawal, Research Analyst at Equitymaster, thinks there is still a lot more steam left to this smallcap rally.

Despite rallying more than 130% since the March 2020 lows, Richa believes smallcap stocks are set for a massive up move in 2021 and beyond.

Here's what she wrote in a recent edition of Profit Hunter...

  • The P/E for smallcap index doesn't make sense. There are thousands of listed small companies. Some have negative earnings. The base is not a valid data to work with.

    That said, the closest proxy to relative valuations is the Smallcap to Sensex ratio,

    Historically, this ratio has averaged 0.43x. In the previous mega runs of the smallcap index, this ratio has gone as high as 0.75x.

    In January 2018, when smallcaps peaked, the ratio was at 0.58x.

    Guess where this ratio is now after a 100% run up in the smallcap index?

    0.38.r

    It's lower than the median over 2 decades.

Richa believes if you focus on the quality of business, margin of safety in valuations, and an optimum asset allocation, you are likely to create huge wealth for yourself.

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Moving on to stock specific news...

Pharma stocks were among the top buzzing stocks today.

Shares of pharma companies were in demand today after the government banned export of antiviral drug, Remdesivir (injection and API both) in order to address increased demand in view of rising Covid-19 cases in the country.

The government banned exports of the Covid-19 drug Remdesivir after reports of shortages, hoarding and profiteering in Mumbai and several other cities in India.

India has been witnessing a surge in Covid-19 cases with the second wave of the pandemic. Union Health Ministry said it is taking measures to ensure easy access to Remdesivir for hospitals and patients.

Currently, seven Indian companies are producing Remdesivir injections under voluntary licensing agreement with US-based Gilead Sciences. These producers have an installed capacity of about 3.88 million units per month.

Hetero Drugs, Cipla, Zydus Cadila, Dr Reddy's Laboratories and Divi's Laboratories are among few Indian companies who produce Remdesivir under a licensing pact with Gilead Sciences.

We will keep you updated on the latest developments from this space. Stay tuned.

Speaking of stock markets, in the latest weekly Momentum Moves video series, Brijesh Bhatia talks about the Gas Distribution index (GDI). This is an index we have created.

As per Brijesh, the GDI is indicating gas distribution stocks can be in favour for the next couple of weeks. Traders and investors should definitely have gas distribution stocks in their portfolios for the short-term.

Tune in to the below video to find out more:

Moving on to the news from IPO space...

Bengaluru-based Shriram Properties has filed draft prospectus with the markets regulator to raise Rs 8 billion via initial public offering (IPO).

The proposed IPO comprises equity shares of face value of Rs 10 each of the company aggregating up to Rs 8 billion.

The IPO will be a fresh issue of Rs 2.5 billion and an offer for sale (OFS) of up to Rs 5.5 billion by current shareholders and promoters.

Shriram Properties has proposed partial exits to its four existing investors i.e. TPG Capital, Tata Capital, Walton Street Capital and Starwood Capital, which hold around 58% stake in the company.

The OFS would comprise sale of shares worth Rs 1.5 billion by Omega TC Sabre Holdings, Rs 0.1 billion by Tata Capital Financial Services, Rs 1.5 billion by TPG Asia SFV Ltd., Rs 2.2 billion by WSI/WSQI V (XXXII) Mauritius Investors Ltd. and Rs 0.3 billion by other selling shareholders.

The company proposes to utilize the net proceeds from the fresh issue towards repayment of debt and general corporate purposes.

The company has a large presence in South India. It has completed various real estate projects and many projects are under construction.

Note that despite the Covid-19 epidemic, the Indian real estate sector has managed to see three successful public issues of real estate investment trusts (REITs).

Raheja's Mindspace Business Parks REIT was listed in August last year after raising Rs 45 billion, while global investment firm Brookfield India REIT worth Rs 38 billion got listed in February this year.

Recently, India's largest realty firm Macrotech Developers (Lodha Developers), raised as much as Rs 25 billion via an IPO, which closed last week on Friday.

The IPO of Macrotech Developers was subscribed 103% which saw a robust response, led by qualified institutional buyers and non-institutional investors.

The portion set aside for qualified institutional buyers (QIBs) received 22.99 million bids against 10.16 million on offer, while that reserved for non-institutional investors received 8.27 million bids versus 7.62 million on offer.

The retail portion saw tepid response, with 34% subscription.

We will keep you posted on all the news from this space. Stay tuned.

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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Stock Market Updates

Sensex Trades Marginally Lower, Dow Futures Up by 174 Points (Today's Market)

May 14, 2021 12:30 pm

BSE Sensex is trading down by 29 points, while the NSE Nifty is trading down by 39 points.

Sensex Opens Flat; Asian Paints Rallies 7% Post Q4 Results (Today's Market)

May 14, 2021 09:30 am

Indian share markets open flat. The BSE Sensex opened down by 33 points, while the Nifty is trading lower by 14 points.

ADANI TOTAL GAS Share Price Down by 5%; BSE 500 Index Down 0.1% (Today's Market)

May 14, 2021 09:34 AM

ADANI TOTAL GAS share price is trading down by 5% and its current market price is Rs 1,330. The BSE 500 is down by 0.1%. The top gainers in the BSE 500 Index are ASIAN PAINTS (up 6.7%) and BANK OF INDIA (up 5.7%). The top losers are ADANI TOTAL GAS (down 5.2%) and VINATI ORGANICS (down 7.1%).

JINDAL STEEL & POWER Share Price Down by 5%; BSE METAL Index Down 2.4% (Today's Market)

May 14, 2021 09:32 AM

JINDAL STEEL & POWER share price is trading down by 5% and its current market price is Rs 466. The BSE METAL is down by 2.4%. The top losers are JINDAL STEEL & POWER (down 5.3%) and NMDC (down 5.3%).

BANK OF INDIA Share Price Up by 5%; BSE BANKEX Index Up 0.3% (Today's Market)

May 14, 2021 09:28 AM

BANK OF INDIA share price is trading up by 5% and its current market price is Rs 77. The BSE BANKEX is up by 0.3%. The top gainers in the BSE BANKEX Index is BANK OF INDIA (up 5.2%). The top losers is HDFC BANK (down 0.2%).

GRINDWELL NORTON Share Price Up by 8%; BSE CAPITAL GOODS Index Up 0.4% (Today's Market)

May 14, 2021 09:26 AM

GRINDWELL NORTON share price is trading up by 8% and its current market price is Rs 1,259. The BSE CAPITAL GOODS is up by 0.4%. The top gainers in the BSE CAPITAL GOODS Index is GRINDWELL NORTON (up 7.7%). The top losers are L&T (down 0.3%) and V GUARD INDUSTRIES (down 0.4%).

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