5 Reasons Why Sensex Plunged 740 Points Today

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Indian share markets witnessed huge selling pressure today and ended deep in the red.

Benchmark indices registered sharp losses tracking nervousness in Chinese stock market coupled with a steep rise in the daily Covid-19 infections along with monthly expiry of the derivative contracts.

At the closing bell, the BSE Sensex stood lower by 740 points (down 1.5%).

Meanwhile, the NSE Nifty ended down by 225 points (down 1.5%).

Maruti Suzuki and Bharti Airtel were among the top losers today.

SGX Nifty was trading at 14,450, down by 102 points, at the time of writing.

The BSE Mid cap index and the BSE Small cap index ended down by 2.2% and 1.9%, respectively.

On the sectoral front, telecom stocks, auto stocks and power stocks were among the hardest hit.

Asian share markets ended on a negative note today. Weighing on sentiment was a selloff in Chinese technology shares due to concerns they will be delisted from US bourses and worries about a semiconductor shortage.

Both, the Shanghai Composite and the Hang Seng ended lower by 0.1%.

US stock futures are trading positive today with the Dow Jones Futures trading up by 61 points.

The rupee is trading at 72.61 against the US$.

Here are Top 5 Factors Why Indian Stock Markets Were Down Today:

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

India recorded 47,262 fresh Covid-19 cases in a day, the highest single-day rise so far this year, taking the nationwide tally to 1,17,34,058, the Union Health Ministry said on Wednesday. It also said a new "double mutant" variant of Covid-19 was detected in Delhi, Maharashtra and some other places.

Note that India has recorded the most number of cases after the United States and Brazil. Total deaths have shot up to 160,441 in India.

Weak Global Cues: Asian stock markets witnessed selling today amid reports of lockdowns in Europe and a potential tax hike in the US.

European stock markets too inched lower as investors swapped energy and retail stocks with shares of companies seen as safer during heightened economic uncertainty following a new round of coronavirus restrictions in the euro zone.

Rising Dollar: The dollar hit a fresh four-month high to the euro today amid worries about Europe's third Covid-19 wave and potential US tax hikes.

FII Outflows: Foreign institutional investors (FIIs) were net sellers in the capital market on Wednesday as they offloaded shares worth Rs 19.5 billion.

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

Most of the profit-booking was seen in the auto and telecom sector today with stocks such as Maruti Suzuki and Bharti Airtel 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!

Speaking of stock markets, in his latest video for Fast Profits Daily, India's #1 trader Vijay Bhambwani talks about how the Nifty could move this year.

Tune in to the below video to find out more:

In news from the commodity space, gold prices for the latest contract on MCX are trading down by 0.3% at Rs 44,730 per 10 grams.

Domestic gold and silver prices struggled today amid mixed global cues. Surging coronavirus cases and a dip in US bond yields supported the safe-haven appeal of gold while a stronger US dollar weighed on the precious metal.

Among gold ETFs, UTI Gold ETF and Invesco India 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 the latest Momentum Moves video, Brijesh Bhatia explains why he believes gold could test US$ 2,500 in COMEX and Rs 60,000 in the long-term.

As per Brijesh, the weekly chart of COMEX and MCX are both indicating a bullish scenario for gold and he believes there are four reasons why gold is an excellent buy here.

You can watch the video here: Gold: US$ 2,500 & Rs 60,000

In news from the financial markets, several companies have successfully raised fresh equity capital through qualified institutional placements (QIPs) over the past few weeks.

As per an article in Business Standard, at least five companies have already raised or are in the process of raising a cumulative Rs 93 billion via QIPs.

There have also been number of secondary share sales, helping existing investors and promoters divest their holdings.

Existing investors or promoters have divested equity holdings worth Rs 142 billion through block transactions or offer for sale (OFS) this month.

The article stated that companies and mutual funds are making a dash before the end of the financial year to raise capital. The move will help shore up their balance sheets, impacted by the Covid-19 pandemic.

The list of companies raising fresh capital is dominated by financials and realty firms.

The largest block transaction this month was the sale of treasury shares in BPCL worth Rs 55.3 billion followed by Carlyle's 4.3% divestment in SBI Cards and Payment Services to raise Rs 39.4 billion.

In terms of QIPs, the largest was by Godrej Properties worth Rs 37.5 billion.

The deal pipeline this year has been underpinned by strong capital flows into the Indian stock market. Foreign portfolio investors (FPIs) have pumped in over US$ 8 billion into domestic stocks so far this calendar year.

How this trend pans out going forward remains to be see. Meanwhile, we will keep you updated on the latest developments from this space.

Moving on to stock specific news...

Wabco India was among the top buzzing stocks today.

Shares of Wabco India slumped 10% after the promoter's two days stake sale through OFS route began today.

The floor price has been fixed at Rs 5,450 a share, an 11% discount to Wednesday's closing price of Rs 6,102 apiece on the BSE.

The issue opened today for non-retail investors and will open on Friday for retail investors.

As per the stake sale plan, the promoter ZF International UK will offload 18.1% stake through OFS.

The sale is being undertaken by the seller for achieving the minimum public shareholding requirement in the company, Wabco India said in an exchange filing.

As on December 2020, the promoters, Wabco Asia Private (75%) and ZF International UK (18.1%), collectively held 93.1% stake in the auto parts and equipment company.

Wabco India share price ended the day down by 5%.

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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