The BSE Sensex fell 1.30% or 930.88 points to close at 70,506.31. The Nifty 50 declined 1.41% or 302.95 points to close at 21,150.15. The Sensex and Nifty hit lifetime highs of 71,913.07 and 21,593.00, respectively, before falling as much as 2.2% (from the peaks) to their day’s lows. “There was no major trigger, but the new Covid variant seems to be a reason,” said Narendra Solanki, head of fundamental research, investment services, Anand Rathi Brokerage.
Further Declines Possible
“The profit-taking was inevitable after the recent rally,” said Solanki of Anand Rathi.
Till Tuesday, both stock benchmarks had gained almost 12% from October 26 in a record-breaking rally that witnessed the Sensex breach 70,000 and the Nifty cross 21,000, aided by fresh foreign purchases, the BJP’s victories in state elections and softening of global oil prices.
Many market participants felt equities were overbought after the rise. After Wednesday’s sell-off, analysts do not rule out further declines of 3-4% from current levels in both indices, with the next key support for the Nifty seen at around 20,800 levels. “It seems like a perfect bull market correction, where markets correct for three-four days and then continue their up-move,” said Hemang Jani, founder, Finazenn Advisory. Jani said energy, PSU and railway shares, which have been the top performers in recent weeks, appear most vulnerable.
What’s Pulling Back
The new Covid variant and events in the Red Sea region could determine investor sentiment in the near term. India recorded 614 new Covid-19 infections in a day on Wednesday, the highest since May 21.Sanjeev Hota, head of research, Sharekhan by BNP Paribas, said, “The potential geopolitical tension due to the impact on shipping routes in the Red Sea region arising out of Houthi militia from Yemen has dented investor sentiment.”