Taking Stock | Bloodbath on D-St! New corona variant drags market 3% lower; investors lose Rs 7 lakh crore

A new variant of the coronavirus in South Africa and weak global cues dragged the domestic stock markets lower, with the Nifty 50 briefly breaching the 17,000 level and the BSE Sensex falling 1,800 points intraday, registering the biggest single-day fall since early April.

The markets started the December derivative series on a weaker note amid negative Asian stocks and selling continued as the day progressed, pulled down by profit-booking across sectors, except pharmaceuticals.

At the close, the Sensex had fallen 1,687.94 points, or 2.87 percent, to 57,107.15. The Nifty 50 declined 509.80 points, or 2.91 percent, to 17,026.45.

Investors lost Rs 7,36,785.29 crore of wealth in the November 26 session, with the BSE’s market capitalisation dropping to Rs 2,58,30,168.59 crore against Rs 2,65,66,953.88 crore on November 25.

“Triggered by the new Covid variant in South Africa, domestic markets plummeted into negative territory, following weak global peers. Existing inflation fears coupled with worries of an aggressive policy tightening by the US Fed Reserve also added to today’s catastrophic session,” said Vinod Nair, head of research at Geojit Financial Services.

“On the domestic front, a broad-based selloff was witnessed as investors dumped Covid-sensitive stocks while focus shifted towards the pharma sector amid growing concerns over the new variant with higher mutations.”

Among measures of the broader markets, the BSE midcap index plunged 3.2 percent and the BSE smallcap index lost 2.6 percent.

A new variant of the Covid-19 virus was detected in South Africa and Botswana on November 25. Currently identified as B.1.1.529, the variant is of concern because of its high number of mutations and rapid spread among young people in Gauteng, South Africa’s most populous province.

The World Health Organization had scheduled a special meeting on November 26 to discuss plans to tackle the new variant.

JSW Steel, Hindalco Industries, Tata Motors, IndusInd Bank and Adani Ports were among the major losers on the Nifty. The gainers included Cipla, Dr Reddy’s Laboratories, Divis Laboratories, Nestle and Tata Consultancy Services.

The Nifty pharma index rose 1.7 percent, while other sectoral indices fell 2-5 percent.

“The markets are sensing a bit of selling pressure from foreign institutional investor actions, but the move seems to be temporary. The fundamentals of the economy are still sound and better earnings can be seen in the coming quarters,” said Mohit Nigam, head – PMS, Hem Securities. “Valuations of some companies seem to be a bit stretched and due to slight market correction they are witnessing profit booking.”

The pressure comes in cycles and might continue for some time, but it also provides an opportunity to invest in quality stocks when they are available at better valuations, he said.

“Also, this time around, domestic institutional investors were not able to cover the FII selling, hence the pressure was seen with strong market-wide downward movement,” Nigam said.

Stocks and sectors

On the BSE, all sectoral indices ended in the red, except healthcare (up 1 percent). Among stocks, a volume spike of more than 100 percent was seen in Indiabulls Housing and Escorts.

A long build-up was seen in Indiabulls Housing, Escorts and Alkem Laboratories, while there was a short build-up in PVR, Bandhan Bank and Tata Power. More than 200 stocks, including Vimta Labs, Shipping Corporation Of India and BEML, hit a 52-week high on the BSE.

Technical View

The Nifty formed a bearish candle on the daily as well as weekly scales by breaking key support zones, which doesn’t bode well for the market.

If the Nifty holds below 17,350, weakness may persist towards 16,800 and 16,500, whereas medium-term hurdles can be seen at 17,500 zones, said Chandan Taparia, vice president, analyst-derivatives, at Motilal Oswal Financial Services.

Outlook for November 29

Sachin Gupta, AVP Research, Choice Broking

Technically, the index has continued the breakdown of the head-and-shoulders pattern after retesting the neckline, which indicates bearishness in the index. Moreover, the index has moved below the 100-day SMA and also formed a bearish Marubozu candle on the daily chart.

However, the momentum indicators are in oversold territory. At present, the Nifty has support at 16,700 and resistance at 17,300.

Ajit Mishra, VP-Research, Religare Broking

Though Covid is not new to the market, the reaction is largely in response to the news of a different variant, while the US and Europe are already struggling. The way markets closed on Friday, we expect more pain in the coming sessions.

Apart from the global Covid-related update, markets will also be eyeing domestic data like auto sales and GDP numbers for cues. Since the Nifty has slipped below the critical support zone of 17,150, the next crucial support comes at 16,700. Traders should continue with the bearish bias and use the bounce to create shorts.

Investors, on the other hand, should see this as an opportunity and start accumulating quality stocks in a staggered manner.

Parth Nyati, founder, Tradingo

Technically, the Nifty is continuing its downward trend following the breakdown of a bearish head-and-shoulders formation and it has also slipped below its critical 100-DMA support of 17,088 with bearish Marubozu candlestick formation that has opened the door for further weakness towards 16,700/16,400 levels.

On the upside, 17,100 will act as an immediate hurdle, while 17,350-17,400 will be the next critical resistance zone.