Closing Bell: Bloodbath on Street with Sensex plunging 1,406 pts, Nifty below 13,350 on renewed COVID fears

Taking Stock | Stocks Fall Like Ninepins As Volatility Index Jumps 25%; Investors Lose Rs 6.64 Lakh Crore

Nifty formed a big red candlestick formation on the daily chart, erasing the gains of the last 11 days.... Read More

Today, the market has formed big red candlestick formation on a daily chart. It has erased the gains of last 11 days. In fact, since the market has formed higher bottom at 12790 on 26th of November, the market has never given any decisive candlestick pattern on daily basis. Even though the trend of upward and gained 1000 points in 15 days Nifty made multiple indecisive candles in between. The same indecisiveness finally resulted into today’s vertical fall. It’s a bearish reversal formation the short term.

Nifty could slide to either 13000 levels, where it has support as per Options data or 12500, which was the highest of the previous up-move (all time highest levels on Nifty till January 2020). On the higher side, 13400/13500 would be hurdle zone. Reduce weak long positions between 13400/13500 levels. Only strong markets can cross and close above 13500 levels. Strong buying opportunity between 12700/12600 levels for medium term investors.

Markets plunged sharply lower and lost over 3%, tracking unsupportive global cues. After the initial downtick, the benchmark recouped all the losses but couldn’t sustain at the higher levels as the day progressed. However, the situation worsened with the weak start of the European markets, in reaction to the news of strict lockdown in the UK. Consequently, the Nifty ended deep in the red at 13,328 levels. All sectoral and broader market indices too ended with the negative bias wherein metals, oil & gas and realty were the top losers.

We’ve been maintaining a cautious on markets and reiterate the same for the following sessions too. The recent spurt of COVID cases in the UK has spooked the markets world over as the new variant could increase the transmission rate. Now, the next step is strict travel restrictions, which would dent the economic recovery. Technically, Nifty has tested the lower band of the prevailing rising broadening formation around 13,150 and its breakdown could trigger a further decline towards the 12,700-12,800 zone. In case of a rebound, the 13,400-13,600 zone would act as a hurdle. We suggest avoiding naked leveraged trade in the futures segment and preferring option strategies until the markets stabilise. Investors, on the other hand, should utilise this fall and accumulate quality stocks on dips.

In fear of a new wave of coronavirus and reports of the rapid spreading of new virus strain in the UK, a deep correction was triggered in the equity market. Travel restrictions imposed by several countries to and from UK have added concerns of yet another lockdown. European market witnessed further selling pressure, as the UK and EU failed to reach a trade deal before the decided deadline. As we all know, the vulnerability of the market was high due to quick gains made in the ongoing rally leading to low margin of safety. Despite which, we do not expect a big correction rather a consolidation, in the short-term, of not more than 7 % to 10% in the main indices. Buying at dips can be considered as a strategy in the falling market.

The Indian equities tumbled as new strain of coronavirus in the UK created panic among the investors. Also the overhang on Brexit talks has added to negative sentiments. Further lack of depth in the market owing to holiday season aided to the big fall today. We expect equities market to witness further volatility in the near term. Nevertheless, correction after big rally is always a healthy sign for the market and provide good opportunity to add quality stocks for investment purpose.

We continue to remain positive on equities for next 2-3 years owing to weakness in USD coupled with pro-growth government policies and dovish fiscal policies.

On the global front, we got good news and bad news overnight – Good being that the democrats and republicans managed to finalize the latest stimulus package which will add $900bn to the US economy. The bad news is a new strain of the virus in the UK which appears to be more contagious than the existing one. Even so, the strain appears similar to the current one for which vaccine rollout is on at full speed. Therefore, the bad news seems to come with its own glimmer of hope.

Nothing else has majorly changed. We continued to buy today, and will do so for the rest of the week. Today’s markets are therefore could serve as an entry point for those waiting for a correction. As Warren Buffett says, “be greedy when others are fearful.”

The new variant of the Novel Coronavirus in the UK spooked markets as we witnessed intense selling in pivotal throughout afternoon trade. While the street was bracing for a correction this week after a sharp up move, the sheer velocity of the fall across broader markets took the bulls by surprise as practically none of the key indices constituents were in the Green today.

The Index has broken its support of 13500 which indicates a stop out on all long positions. We would now need to wait and watch the markets over the next couple of sessions. One should not take hasty and risky trades by going long or short on the markets. For the upside to resume, we would need to start trading above 13750-13800. In order to break on the downside, we should wait for a day or two and re-evaluate the markets. The strategy for the current market would be to sit on the sideline without a trade!

Indian rupeeended21 paise lower at 73.78 per dollar, amidhuge sellingseen in the domestic equity market.It opened 18 paise lower at 73.75 per dollar against Friday's close of 73.57 and remained in the range of 73.64-73.82.

Market broke the six day winning streak as it witnessed freefall in the second half dragging Nifty below 13,350 on the back of fear of a new wave of coronavirus in the UK.

At close, the Sensex was down 1,406.73 points or 3.00% at 45553.96, and the Nifty was down 432.10 points or 3.14% at 13328.40. About 580 shares have advanced, 2381 shares declined, and 163 shares are unchanged.

All stocks on the Nifty50 ended lower led by the ONGC, Tata Motors, GAIL, Hindalco and IOC.

All the sectoral indices ended in the red. Nifty PSU Bank index shed 7 percent, while Metal, Infra, Bank, Auto and Energy indices fell 4-5 percent.

The market failed to show resilience to stay above the Nifty 50 Index level of 13750. While it is subject to further price action evolution, the technical factors are shifted after the sharp correction today to support a further correction in the future. Any corrective wave down should find support around 12990-12960.

As such, we advise the traders to refrain from building a new buying position until we witness a correction till 12990-12960 level. It has observed volatility to expand in today’s trading session indicating profit booking and stock distribution at a higher market level.

Fitch Ratings has assigned Tata Consultancy Services (TCS) Long-Term Foreign-Currency and Local-Currency Issuer Default Ratings (IDRs) of 'A-'. The outlook is negative. The ratings reflect TCS's weak linkage with Tata Sons Private Limited (TSOL), which holds 72% of TCS.