Nifty down 3% today, posted its worst day since Apr 2021

The benchmark indices opened the week by losing over 3% and breaking major support levels. Nifty 50 lost 531 points to close at 16,842, while SENSEX shreds off 1747 points before closing just around 56,400. The decline was led majorly by banking, realty, metal, and auto stocks. Except for TCS, all Nifty 50 stocks ended in the red.

The existing confusion and tension among the investors due to sooner than expected rate hikes by Fed fuelled by worst inflation data from the US were further aggravated by escalating tensions and the development of war-like situations between Russia and Ukraine. The panic is also reflected in the global markets with Nasdaq giving a closing below 13,800 after losing almost 400 points. The Asian markets also reacted similarly to the negative global cues.

Worst Hit Sectors

Although all the sectoral indices suffered badly, the banking stocks had been the major market dragger. The Nifty Bank plunged 4.18%, losing over 1600 points in the intraday session. The top loser among the banking stocks was PNB which lost 6.67%. This is followed by Nifty Realty which tanked 5.29%. 

The broader market indices underperformed their smaller peers. The Nifty Next 50 was down by 3.34%, Nifty 100 by 3.10%, Nifty 200 by 3.21%, and  Nifty 500 by 3.30%. The Nifty Midcap 100 and Nifty Smallcap 100 lost 3.94% and 4.44% respectively. 

JSW Steel, HDFC Life, HDFC, Tata Steel, Tata Motors, ICICI Bank, SBI were the top losers of the Nifty 50 index. 

Reasons Behind the Market Fall

Last Friday, the Indian stock market reacted to the steep hike in the US inflation data, which was much more than most investors expected. This has led to speculations that the Fed might start the interest rate hike sooner than expected. The US market also reacted poorly to this in the last trading session. 

The already negative global cues were further fueled by rising tensions between Russia and Ukraine. The war-like situation emerging between the two countries affected both the European and Asian markets as well. The panic selling resulted due to the global market also compelled investors in India to switch to bulk sell-off. FIIs are still selling equities in the Indian market and it is expected that DIIs might join the sell off saga soon.

What should you do now?

• Invest in equities in a staggered manner. 
• Keep your SIP’s running. Stick to large caps and index stocks that are best suited to navigate the ongoing volatility 
• INDmoney’s ROBO STP can help you invest in these volatile markets
• Invest only high-quality AAA-rated bonds as they have the least risk.
• There is a significant tax advantage in holding a debt fund for more than 3 years. 
• For a more than 3-year investment horizon, an investor should prefer short duration (duration < 3) fixed income instruments over a long duration. Stick to short duration funds and bonds, as yields are expected to remain volatile in the near future. Further, in the medium-term (2-3 years) the rate cycle is expected to bottom out and move up.
• Avoid lump sum allocation and adopt a more staggered approach over the next few months.