5 Reasons Why Sensex Plunged Over 1,100 Points Today

Mon, 22 Feb Closing

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Extending losses to the fifth straight session, Indian share markets ended deep in the red, dragged down by index heavyweights Reliance Industries and TCS and amid a lackluster trend in global markets.

The BSE Sensex plunged over 1,250 points and slipped below 50,000 mark for the first time in nearly three weeks, while the NSE Nifty slipped as much as 340 points to 14,635.

With today's fall, both the benchmarks have shed over 4% in the past five trading sessions.

At the closing bell, the BSE Sensex stood lower by 1,145 points. Meanwhile, the NSE Nifty ended down by 306 points.

ONGC was among the top gainers today. Dr Reddy's Lab, on the other hand, was among the top losers today.

SGX Nifty was trading at 14,706, down by 300 points, at the time of writing.

The BSE Mid cap index and the BSE Small cap index ended down by 1.3% and 1%, respectively.

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

Shares of Honeywell Automation and Ratnamani Metals hit their respective 52-week highs today.

US stock futures are trading lower today indicating a weak opening for Wall Street indices. Nasdaq Futures are trading down by 169 points (down 1.2%), while Dow Futures are trading down by 193 points (down 0.6%).

The rupee is trading at 72.49 against the US$.

Gold prices are trading up by 1% at Rs 46,638 per 10 grams.

Here are Top 5 Factors Why Indian Stock Markets Plunged Today

Weak Global Cues: Asian share markets erased their opening gains and ended mixed as expectations for faster economic growth and inflation globally battered bonds and boosted commodities while rising real yields made equity valuations look more stretched in comparison.

The Hang Seng ended down by 1.1% while the Shanghai Composite slid 1.5%.

Rising Bond Yields: A jump in bond yields both in India and in the US unsettled investors. The government bond yields jumped to their highest level since August 27 while yields on 10-year Treasury notes have already reached 1.38%, breaking the psychological 1.30% level and bringing the rise for the year so far to a steep 43 basis points, reported Reuters.

Rising Covid-19 Cases: Covid-19 cases have started spiking in some regions of India, spooking investors who believed the crisis was all but over.

FPIs Slow Down: Concerns over rising Covid-19 cases and valuations seem to have weighed on FPI inflow. Even though FPIs have been buying, the pace has slowed.

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!

Speaking of the current stock market scenario, note that the BSE Sensex crossed the 52,000-mark last week on Monday for the first time. Sensex's P/E ratio is at a two decade high of 36x.

Have a look at the chart below which shows Sensex P/E over the years.

So, should Sensex valuations at nearly two-decade high be a reason for you to abandon stock picking?

Here's what Tanushree Banerjee wrote about it in one of the editions of Profit Hunter:

• Sensex at 52,000 or higher should not change the way you buy stocks.
  
  You must look for only the most solid businesses that can confront all odds.
  
  And you must not compromise on margin of safety in valuations.
  
  A solid wealth building plan needs thorough research. You will also need a commitment to consistently invest in a few great stocks at the right times.
  
  There may be very few such stocks that are actionable but ones that do qualify could be your starting point.

In a special online event at 5 pm today - The Great Indian Wealth Project - Tanushree will show you how to potentially accumulate Rs 7 crore in wealth, over the long-term.

You can book you free seat here.

In news from the IPO space...

The IPO of Heranba Industries, a Gujarat-based agrochemical company, will open for subscription tomorrow.

Heranba is one of the leading manufacturers of synthetic pyrethroids in India. It manufactures intermediates, technicals and formulations and also exports to more than 60 countries. The company has three manufacturing plants and has over 9,400 dealers.

The company has fixed a price band of Rs 626-627 per share.

Heranba is offering up to 9.98 million shares in the IPO, with 9 million shares under offer for sale (OFS) and the rest through fresh issue of shares.

The funds raised through fresh issue of shares will be utilised to finance the company's working capital requirements and general corporate purposes.

According to the IPO prospectus, in 2019, Heranba Industries dominated the India pyrethroids market, accounting for a share of 19.5% of the total Indian pyrethroids production values.

Other players in this segment include Dhanuka Agritech, Insecticides (India), Syngenta India, Sumitomo Chemical India, UPL, Bayer CropScience and Rallis India.

The grey market has given a thumbs up to the issue, with the premium in the unofficial market surging to Rs 200-210, which translates into 33% premium.

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

Moving on to stock specific news...

Jubilant Foodworks was among the top buzzing stocks today.

Shares of Jubilant FoodWorks, the master franchise owner of Domino's Pizza in India, surged over 5% and hit a fresh 52-week high of Rs 3,127 after the company said it would fully acquire Netherlands-based Fides Food Systems Coöperatief U.A. via its wholly-owned subsidiary Jubilant Foodworks Netherlands B.V.

Jubilant Foodworks has also executed the purchase agreement as guarantor in connection with the investment obligations of Jubilant Foodworks Netherlands B.V.

Following the acquisition, Jubilant Foodworks will indirectly hold 32.8% shares of Fides held by DP Eurasia. DP Eurasia is a public company listed with London Stock Exchange PLC, and is the exclusive master franchisee of the Domino's Pizza brand in Turkey, Russia, Azerbaijan and Georgia.

Jubilant Foodworks share price ended the day up by 5.9%.

Speaking of stock markets, in his latest video for Fast Profits Daily, Vijay Bhambwani covers a very important aspect of trading: capital allocation.

In the video below, Vijay shows you how to allocate your capital as a day trader.

Moving on to news from the engineering sector, Larsen & Toubro has won orders from the power transmission and distribution sector in the range of Rs 25-50 billion.

L&T said that these orders include two engineering, procurement and construction (EPC) orders from two solar photovoltaic units of 200 megawatts (mw) each in Gujarat. L&T will be responsible for designing, engineering, supply, construction, testing, commissioning and operations and maintenance of the grid connected solar power units.

The company won another project for evacuation of power from solar energy zones in Rajasthan to build a 765kV double circuit transmission line.

L&T won the turnkey project to supply and install high voltage distribution systems in certain districts in West Bengal. It won another order to construct 220kV and 132kV transmission lines from the state's transmission utility.

In international orders, L&T won an order to install line connected current limiting reactors for Qatar, a project that will help improve grid stability and enable use of existing switchgear without major replacements.

L&T share price ended the day down by 3.6%.

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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