Benchmark indices saw a healthy rebound with the BSE Sensex climbing more than 1,000 points on Friday, February 25, following a recovery in global peers. This followed the rout in the previous session caused by the Ukraine-Russia conflict that eroded more than Rs 13.4 lakh crore of investors’ wealth in a single day. But the number of stocks that hit the lower circuit remained higher than those at the upper circuit.
The market, after hitting lows of September 2021 in the previous session, recovered by more than 2 percent driven by short covering and value buying in beaten -down quality stocks. The Nifty50 jumped 413 points to 16,661, and the BSE Sensex rallied 1,355 points to 55,885 at 15:00 hours IST.
The recovery in the broader market was also sharp as the Nifty Midcap 100 and Smallcap 100 indices gained around 4 percent each, while sectors including banking, financial services, IT, metal, pharma, auto and realty gained 2-5 percent.
Despite the rally, nearly 300 stocks hit their lower circuits against 250 stocks hitting the upper circuit on the BSE. Most of the stocks that hit the lower circuit are from the ‘B’ Group and lower category stocks.
Companies traded under the permitted category on the BSE, listed mutual funds and scrips objected to by the surveillance department of the exchange are kept out of the ambit of the group ‘A’. Generally, ‘A’ group stocks are the most liquid ones and are traded in the normal rolling settlement process, while ‘B’ group stocks are also in the normal rolling settlement process but are ranked below ‘A’ group shares on certain parameters including liquidity. ‘T’ Group shares are not available for intraday trading.
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Stocks that hit the lower circuit included Megastar, Narayani Steels, SM Gold, Cinevista, Nagreeka Capital, VR Films, Gensol Engineering, DJ Mediaprint, Misquita Engineering, Janus Corporation and Sun Retail. The majority of them were down by 5 percent.
However, Sakuma Exports is frozen at 10 percent upper circuit, while other stocks including Oil Country Tubular, Genesys International, Arihant Capital Markets, Premier Explosives, California Software, Lloyds Metals, Shah Alloys, Visa Steel and many more hit the 5 percent upper circuit.
The market is not out of woods yet given looming concerns of Ukraine-Russia tensions and elevated oil prices, which could delay the global economic recovery. In fact, the higher oil price is the major concern for a country like India that imports 82-85 percent of oil requirements, experts say.
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International benchmark Brent crude futures traded at more than $100 a barrel levels, up around 45 percent in the last two months.
“We are in the context of a war with a high level of uncertainty. A lot will depend on whether this will be a short war or if it will get prolonged. If it turns out to be a short war with Russia succeeding in putting a pro-Russian government in Ukraine soon, markets are likely to bounce back. On the other hand, if it gets prolonged, the uncertainty will impact markets,” said V K Vijayakumar, chief investment strategist at Geojit Financial Services.
Since the situation remains fluid, investors should remain cautious and vigilant, he advised.
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The volatility also eased significantly by more than 17 percent to the 26 mark, but having it above the 20 mark still indicates the situation is in favour of bears. Generally, it has to drop below the 20 level to get the market to stabilise.
Given these are intermittent corrections and the economy and earnings are expected to show healthy growth in coming years, any such fall is always a great opportunity for investors, experts feel.
Despite this recovery, equity benchmarks are still down more than 10 percent from the record highs of October 2021.
“For long-term investors who can ignore the short-term gyrations in the market, there are buying opportunities in high-quality stocks that have corrected significantly. Financials, IT and real estate stocks have the potential to bounce back smartly in a favourable environment,” said Vijayakumar.
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