Bloodbath on Dalal Street: Nifty and Sensex plunge 2.6%

The Indian equity market showed a massive correction as a huge sell-off is seen in all major sectors. The Nifty 50 index lost 468 points, while the SENSEX closed after wiping off more than 1500 points in the intraday market session. This is also the worst intraday fall in both the major indices in the last 11 months.

All the key indices lost a major share and closed in deep red. The Nifty Midcap 100 and Nifty Smallcap 100 lost 3.86% and 4.78% respectively. The broadest index Nifty 500 went down by 3.06%. On the sectoral front, Nifty Realty suffered the most by shoving off 5.90%. Heavy sectoral indices like Nifty IT and Nifty Metal faced 5.23% and 3.42% downside respectively. The key reason behind this huge market correction on the opening day of the week is seen as investors’ reaction to the poorly performing US stocks market and the rise in prices of crude oil.

The Nifty 50 index hit an intraday low of below 17,000, which is a big support zone. It later recovered around 150 points to close at 17,150. A similar trend was seen in SENSEX that went below 57,000 once in the afternoon session. Except for two stocks, ONGC, and Cipla, all stocks of Nifty 50 closed in red. 

What is triggering the sell-off?

Fed Tapering and Rising Bond Yields 

Experts suggest that the markets are reacting to the weak global cues, particularly from the US. Investors are believing that the US Federal Reserve is going to raise interest rates soon in order to contain the rising inflation. The investors’ fear can be confirmed by the figures registered at the US Treasury yields, which went up significantly. This is forcing investors to withdraw money from risk-bearing equity markets. All these are putting pressure on the Indian equity market as well.

FPIs and FIIs sell-off

The weakness seen in the market is also due to disinvestment shown by FPIs (Foreign Portfolio Investors) and FIIs (Foreign Institutional Investors). In the last three market sessions of the previous week alone, FIIs have pumped out around Rs 11,000 crores from the market.

Rise in Crude oil price

The rise in crude oil prices is also a major concern for investors. In the first month alone of 2022, the crude oil price is up by 10%. As per Morgan Stanley, the Brent Crude oil price may hit 100 $ in the second half of this year. 

Brighter side of the story

Some experts also believe that the ongoing market correction can prove to be healthy for the equity market in the coming days. The markets have remained overvalued for quite a long, thereby, a bit of correction can help in making it lighter to scale new heights in the future.

Moreover, the Omicron variant has not made any significant negative impact on the economy, which is a positive thing for both the companies and investors. The problems related to the US market, Crude oil prices, etc. might cool down soon to allow more space for the Indian stock market to mimic the last year’s performance.

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.