Bear market wipes out over ₹4.44 lakh cr investor wealth in a day

On Wednesday, after touching an intraday low of 60,938.38, Sensex closed at 61,067.24 lower by 635.05 points or 1.03%. Meanwhile, Nifty 50 shed 186.20 points or 1.01% to end at 18,199.10 after dropping to as low as 18,162.75.

Except for healthcare stocks which outperformed counterparts due to the latest Covid spread, and marginal upside in IT stocks, all other indices were in the red. Banking stocks were the worst hit. Also, in the broader markets, smallcap stocks took a major beating, whereas, midcaps too witnessed significant selling.

Bank Nifty settled lower by 741.55 points or 1.71%, and BSE Bankex slipped by 824.65 points or 1.67%. Except for pharma, and IT stocks, all other sectoral indices dipped by 1% to 3%. BSE Healthcare index skyrocketed by 519.19 points or 2.25%, and Nifty Pharma as well climbed by 2.4% in the closing — emerging as the star performer in a bear market. IT indices were marginally up.

Meanwhile, midcap and small-cap indices on both BSE and NSE contracted between 1.4-2.5%.

As per BSE data, the market cap of equity firms dropped by ₹4,44,559.64 crore to come to ₹2,82,95,398.45 crore on Wednesday. On the previous day, the valuation was around ₹2,87,39,958.09 crore.

Hence, investors’ wealth was corrected by more than ₹4.44 lakh crore.

Notably, foreign institutional investors (FIIs) pulled out around ₹1,119.11 crore from Indian equities on Wednesday, while domestic investors pumped in ₹1,757.37 crore.

Talking about the performance of markets, Deepak Jasani, Head of Retail Research, at HDFC Securities said, “Nifty fell for the second consecutive session, reversing from morning gains. At close, Nifty was down 1.01% or 186.2 points at 18199.1. Broad market indices fell sharply as profit-taking was seen across the board and the advance-decline ratio on BSE fell to 0.29:1, the lowest in almost 3 months. While Covid scare in China and elsewhere was bandied about as a reason for the fall, participants anyway chose to lighten positions.”

On the global front, Jasani added that markets were trying to get into a festive mood on Wednesday and managed small gains, providing a moment of respite in one of the worst years for stocks and bonds in more than a decade.

The renewed Covid scare is likely to keep markets on their toes. Globally, markets were already facing volatility after major central banks like ECB and the US Federal Reserve continued on their hawkish stance and signaled for more rate hikes even in 2023. The slowdown in global economic growth prospects has escalated recession fears in major economies and with the latest Covid outbreak, investors’ sentiments are likely to be volatile further.

However, early control of the fresh outbreak can lead to positive gains. India has stepped up its measures to ensure that the new outbreak does not create any havoc in the country. The Covid situation will be keenly watched.

On the 50-scrip benchmark, Jasani said, Nifty formed a bearish engulfing pattern on daily charts engulfing the previous 3 candles. 17969-18133 band could be the next support cluster for the Nifty while the 18340-18385 band could offer resistance. Nifty is not able to rise for three consecutive sessions since the recent high of 18887.

However, on Thursday, investors will react to RBI’s minutes of meeting for December policy. Under the minutes of meeting, RBI discussed a series of risks on both the global and domestic front, while some MPC members also shed light on the need for change in monetary policy stance. RBI hinted that the battle for taming inflation is not over yet and that the central bank needs a decisive slowdown in inflation for policy change. However, the MPC also revealed that the rate hike impact is yet to be felt in the real economy.

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