Reliance Industries’ proposed stake-sale to Saudi Aramco, Paytm free fall, and withdrawal of three agriculture bills sent equity market indexes on Monday to their biggest single-day fall since April.
The Sensex closed at 58,465, down 1,170 points or 1.96 per cent. The Nifty index ended the day at 17,416, down 348 points or 1.96 per cent. This is the lowest level of the indices in nearly two months.
Share price of RIL – a key indicator of the direction of India’s stock market due to heavy weights in Sensex and Nifty – fell 4.42 per cent to close at ₹2,363, after RIL on Friday said it had dropped plans to sell 20 per cent stake. Is. Withdrew plans to separate Aramco and its oil-to-chemicals business. The stock is down 14 percent from its lifetime high in October.
“The market now seems highly oversold. A combination of key technical indicators shows a situation where sentiment has turned extremely negative and is therefore due for a complete upside.
“The 10-day open interest put-call (derivative option) ratio was at least the same as seen in 2016 post demonetisation. In 2016, post-demonetisation, the markets grew sharply for several months,” said Rohit Srivastava, chief strategist, IndiaCharts.
According to him, only 9 per cent of the stocks in the derivatives segment are showing gains. He says that when such a reading falls below 10 per cent, the index stops falling in the near term and you can call it bottom.
Also, Nifty’s hourly relative strength index (RSI) at 17 is at its lowest level since March 2020.
collateral damage of paytm
In just two days of listing, Paytm’s stock fell over 45 per cent from its IPO price. On Monday, the stock touched a low of ₹1,271 against the IPO price of ₹2,150.
This caused collateral damage in the stock markets. Most high net worth traders borrow hundreds of millions to invest in IPOs, hoping to make a killing from the listing profits. This money is borrowed from non-banking financial companies, which charge only 2-5 per cent margin for raising funds or accepting other shares as margin.
On Thursday, when Paytm fell nearly 30 per cent below its listing price, NBFCs started selling shares held as margin by HNI traders to cover the margin shortfall. HNI traders were also selling shares to cover their losses and make payments to NBFCs.
Experts said the catch-22 situation put huge pressure on the markets. Paytm was India’s biggest IPO at Rs 18,300 crore.
The government’s withdrawal of agriculture bills also weighed on the sentiment as investors feared that it could affect the pace of reforms in the near future.
question mark on reforms
S Ranganathan, head of research, LKP Securities, said, “The repeal of agriculture laws has impacted PSU stocks, while RIL’s O2C plan hasn’t cut Reliance by 4.5 per cent. Come together, the impact of inflation on demand in many sectors worries the market.
Now analysts believe that the market is overbought and there is little chance of any major downside. Amit Gupta, PMS Fund Manager, ICICI Securities said, “With the recent correction, the market has entered a consolidation phase where stock-specific volatility can be used to build an equity portfolio. The high valuation segment is witnessing profit-booking and money is flowing into the value segment, where earnings have started rising after a prolonged stagnation.”
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