Indian equity benchmarks the Sensex and the Nifty witnessed their worst fall in a month on January 27 as sentiment remained weak after a report on Adani Group by Hindenburg Research.
Concerns over a recession in the West and caution ahead of the US FOMC meeting on interest rate decisions also weighed on sentiment.
Sensex fell 874 points, or 1.45 percent, to 59,330.90 while the Nifty ended at 17,604.35, down 288 points, or 1.61 percent.
The selloff was widespread as mid and smallcaps also suffered strong losses; the BSE Midcap index fell 1.29 percent while the Smallcap index dropped 1.89 percent.
The overall market capitalisation of BSE-listed firms fell to ₹269.7 lakh crore from ₹276.5 lakh crore in the previous session, making investors poorer by ₹6.8 lakh crore in a single day.
This was the second consecutive day of losses for the Sensex and Nifty. Sensex has retreated 2.7 percent while the Nifty has fallen 2.84 percent in the last two sessions.
In just two sessions, the overall market capitalisation of BSE-listed firms has fallen by 10.7 lakh crore from ₹280.4 lakh crore on January 24.
Hindenburg's report on Adani has hit the market hard. Hindenburg Research's report on Adani Group stated that the Adani Group engaged in a 'brazen stock manipulation and accounting fraud scheme over the course of decades.'
This triggered a massive selloff in Adani Group stocks while roiling market sentiment.
Banking stocks suffered losses on concerns over their exposure to the Adani Group.
However, global brokerages CLSA and Jefferies do not see a material risk to Indian banks due to their exposure to the Adani Group debt which has doubled in the last three years.
As many as 217 stocks, including ACC, Adani Green Energy, Adani Ports and SEZ, Aurobindo Pharma, Berger Paints, Biocon and Century Plyboards, hit their 52-week lows in intraday trade on BSE.
Crude oil prices also rose as the demand outlook improved. Brent Crude traded over a percent higher near the $89 per barrel mark. The rupee rose 7 paise to close at 81.52 per dollar.
Top Sensex gainers: Shares of Tata Motors, ITC, Mahindra and Mahindra, UltraTech Cement and NTPC ended as the top Sensex gainers.
Top Sensex losers: Shares of SBI, ICICI Bank, IndusInd Bank, Axis Bank and Kotak Mahindra Bank ended as the top losers in the Sensex index.
Most sectoral indices suffered deep losses with Nifty Oil & Gas, Nifty PSU Bank and Nifty Metal cracking 5.60 percent, 5.43 percent and 4.69 percent, respectively.
Nifty Bank (down 3.13 percent), Nifty Private Bank (down 2.69 percent), Nifty Financial Services (down 2.48 percent) and Nifty Consumer Durables (down 2.13 percent) fell up to 3 percent.
Experts' views on markets
Vinod Nair, Head of Research at Geojit Financial Services attributed the sharp slump in the Indian market to an unfavourable research report on Asia’s richest promoter group companies which is also affecting the banking stocks even though the results of the sector are optimistic due to high group lending, indicating potential risk.
Nair said PSU banks are the most impacted compared to private banks owing to high exposure. The FIIs' cautious stance ahead of the Union Budget and FOMC meetings also fuelled the collapse, he added.
Ajit Mishra, VP of Technical Research at Religare Broking said the carnage in the Adani group stocks cascaded across the board and the banking sector faced the maximum pressure.
Participants were already facing challenges due to mixed global cues and caution ahead of the Union Budget and this breakdown has further added to worries.
"We are now eyeing the 17,250-17,400 zone as the next support while any rebound toward the 17,750 level would attract selling pressure. We thus reiterate our view to prefer hedged positions and aligning trades according to the trend," said Mishra.
Technical views by experts
Rupak De, Senior Technical Analyst at LKP Securities pointed out that the Nifty fell below recent consolidation on the daily chart, leading to a big selloff from the foreign institutions. However, the 50-week exponential moving average, located at 17,400, is likely to provide immediate support.
"A further correction may be seen if the index falls below 17,400. On the other hand, resistance is visible at 17,850. As long as the Nifty remains below 17,850, traders may favour a sell-on-rise strategy," said De.
Gaurav Ratnaparkhi, Head of Technical Research, Sharekhan by BNP Paribas observed the Nifty broke down from the consolidation range, which it had been witnessing for the last one month. It broke the support zone of 17,800-17,760, which will now act as resistance as per the principle of role reversal.
"On the downside, the Nifty has halted near the 61.8 percent retracement of the Sept–Dec 2022 rise and 200 DEMA, which are near 17,550. Today’s low of 17,493 will be a key support. If that is breached then the decline can continue till 17,300," said Ratnaparkhi.
Key market data
Disclaimer: The views and recommendations given in this article are those of individual analysts. These do not represent the views of MintGenie.