Profit booking in index heavyweights intensified during the closing stages. As a consequence, benchmark indices plunged deeper into the red and closed the day with significant declines. The BSE Sensex lost in the region of 130 points (down 1.6%) whereas NSE Nifty lost around 40 points (down 0.8%). BSE Midcap and small cap indices were not spared either. They closed lower by around 1.5% each. Just 1 stock posted minor gain for every 3 that declined on the Sensex today.
Today's decline was mainly on account of global factors, most notably the US. It is becoming increasingly clear that the effects of stimulus are waning and the world's largest economy is once again staring at a serious slowdown. The latest signal came from the US housing market where home sales saw worse than expected plunge in existing home sales. Furthermore, employment is also showing no signs of improvement. The scenario elsewhere in the developed world is not very encouraging either. Thus, on account of renewed fears, risk aversion seems to be on the rise and this is leading to weakness in risk assets like Indian stocks. However, if the correction does turn out to be a significant one, it could present investors with yet another opportunity to participate in the long term India growth story at attractive valuations.
With decline of 3%, BSE Realty index emerged as the biggest loser among all sectoral indices today. Biggies like DLF, Unitech, Sobha Developers and HDIL all lost anywhere between 2% to 4%. The pessimism could be attributed to prospects of slowing demand in the real estate space, leading to lower prices. It should be noted that backed by high demand and strong capital inflows, the (real estate space) has been buzzing with activity for quite some months now. Infact, prices in few pockets has risen more than those prevailing during the previous bull market frenzy. But not anymore. Interest rates are on the rise yet again and with property getting out of reach of most buyers, revenues for sector companies might take a hit going forward. Today's decline perhaps was in anticipation of the same.