Markets end in deep red; Sensex, Nifty dive over 1%; pharma stocks outperform on Covid fear

In the broader market, smallcap stocks took a massive beating while significant selling was also seen in midcap shares. Except for outperformance in healthcare stocks due to the new Covid scare and slight buying in IT stocks after their previous days’ correction, all other sectoral indices nosedived with banking stocks emerging as top underperformers on Tuesday. India’s volatility index skyrocketed by nearly 13%.

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.

In terms of sectoral indices, Bank Nifty dipped 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.

Midcap and small-cap indices on both BSE and NSE contracted between 1.4-2.5%.

Pharma giant Sun Pharma was the top gainer followed by HCL Tech, Tech Mahindra, and TCS. On the other hand, IndusInd Bank, Maruti Suzuki, Ultratech Cement, Bajaj Finserv, ICIC Bank, Tata Motors, Axis Bank, SBI, and Kotak Bank were top bears.

S Ranganathan, Head of Research at LKP Securities said, “Benchmark Indices dropped yet again on the back of the Covid scare in China and elsewhere but today’s fall was more noticeable to participants since the red colour on the screen engulfed all over barring Pathology Labs, Hospitals and select Pharma counters involved in covid related drugs. Barring Healthcare & IT all other sectoral indices ended in the red as benchmark Indices lost over a percentage in afternoon trade despite opening in the green even as developed markets continued to trade in the green.”

Further, Vinod Nair, Head of Research at Geojit Financial Services added, “Bears continued to cause havoc in the domestic market while Wall Street snapped its losing streak ahead of the release of the US GDP numbers. Though all other sectors bled, pharma stocks were on a high owing to renewed fears of a global COVID outbreak, and IT witnessed bargain buying. The market also anticipates the release of the RBI meeting minutes for more clarity on the central bank’s thought process.”

As for the rupee, at the interbank forex market, the local unit dropped slightly against the US dollar to close at 82.81 compared to the previous day’s 82.7550 per dollar levels. However, rupee-forward premiums were over 2% nearing their highest level in a month.

Going forward, on Nifty 50, Rupak De, Senior Technical Analyst at LKP Securities said, on the lower end, the index may extend the correction towards 18070; below that, the index may fall towards 17800. On the higher end, 18350 may act as critical support, and the market may remain sell-on-rise till the Nifty remains below 18350.

In regards to banking indices, Kunal Shah, Senior Technical Analyst at LKP Securities explained that the Bank Nifty index witnessed heavy selling pressure on the backdrop of the new coronavirus spreading rapidly across the globe. The index has formed a bearish engulfing pattern on the daily chart which is a bearish pattern. The index’s immediate support on the downside stands at the 42,500-42,300 zone and if it fails to sustain above it will lead to further selling pressure toward the 41,500 level.

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